In an adjustable-rate mortgage (ARM), future mortgage payments will reflect periodic changes in a(n)_______________blank, the rate to which the loan interest is tied after the short-term introductory rate period has expired.
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- (Note, this is how mortgage payments are calculated.) Payments on a loan are amortized when a fixed amount is paid at the end of each time period in order to pay off both the principle of the loan and the interest accumulated up to that point. At the end of each period, interest is charged on the amount still owing. Let P be the initial amount of the loan, and i > 0 be the interest rate charged (per period), R the size of the per period payment (paid at the end of each period), and Pt the amount that is still owed after t periods. So P0 = P(a) Find P1.(b) Find a first order linear recurrence for Pt.(c) Show that the solution to your recurrence relation isPt = (P-(R/i))(1+i)^t + (R/i)Which one of the following statements about a fixed-rate mortgage (FRM) loan is correct? a. The monthly payment of the FRM loan changes over the life of the loan. b. Each monthly payment contains the interest payment component and principal repayment component. The size of each component remains unchanged over the life of the FRM loan. c. Each monthly payment contains the interest payment component and principal repayment component. As time goes by, the size of the interest component increases and the size of the principal component decreases, but the sum of the two components remain unchanged. d. Each monthly payment contains the interest payment component and principal repayment component. As time goes by, the size of the interest component decreases and size of the principal component increases, but the sum of the two components remain unchanged.The loans which are to be repaid within a short period (a year or less) are referred to as: O a. Fixed liabilities O b. Long-term liabilities O c. Contingent liabilities O d. Current Liabilities
- With regard to mortgages, how is the monthly payment including principal and interest categorized as an annuity?Find the monthly payment needed to amortize principle and interest for the fixed rate mortgage. Use eithr the regular monthly payment formula or the given table.The table shows the specifications of an adjustable rate mortgage (ARM). Assume no caps apply. Find a) the initial monthly payment; b) the monthly payment for the second adjustment; and c) the change in monthly payment at the first adjustment. *The principal balance at the time of the first rate adjustment What is the initial monthly payment? (Round to the nearest cent.) CITO Beginning Balance Term Initial index rate Margin Adjustment period Adjusted index rate *Adjusted balance $90,000 20 years 6.5% 2.5% 1 year 8.0% $88,314.60
- What are the Effects of Maturity on Monthly Payments on Fully Amortizing Loans?Consider a home mortgage of $ at a fixed APR of % for years. a. Calculate the monthly payment. b. Determine the total amount paid over the term of the loan. c. Of the total amount paid, what percentage is paid toward the principal and what percentage is paid for interest.Which of the following statement is true of amortization? The computation of loan amortization is wholly based on the computation of simple interest. Amortization solely refers to the total value to be paid by the borrower at the end of maturity. The amortization schedule represents only the interest portion of the loan. The amortization schedule provides principal, interest, and unpaid principal balance for each month. In a typical loan amortization schedule: The amount of money paid towards reducing the loan balance decreases over time. The amount of interest paid each period does not remain constant. The amount of each payment does not remain constant. The amount of interest paid each period increases over time.
- Based upon the simple interest rate method of a fixed interest rate installment loan or mortgage, successive monthly loan payments over time a. pay the same percentage to interest and principal. b. pay increasing percentages to interest and decreasing percentages to principal. c. pay increasing percentages to principal and decreasing percentages to interest. d. pay decreasing percentages to interest and principal.in a fully amortized mortgage, during the last years of the loan, the lender applies A. most of the monthly payment to interest on the loan. B. the monthly payment equally to interest on the loan and the outstanding principal balance. C. all of the monthly payment to the outstanding principal balance. D. all of the monthly payment to interest on the loan. E. most of the monthly payment to the outstanding principal balance.In terms of an effective annual interest rate, how can the interest payment be rewritten?