You must show a number grid by years similar to the one shown in class neatly fo

Question

You must show a number grid by years similar to the one shown in class neatly for full credit. Given the following answer the questions below: 1 year adjustable rate loan Margin is 2 Initial rate charged is 3% Caps are 1%/7% 15 year ternm #4 4%, Year #5 = 896. Yr. 6-9%, Yr. 7-1096, Yr. 8-10% 6. 7, 8, 9. What is the rate charged in Year #3 what is the rate charged in Year #5 what is the rate charged in Year #8 How many years would you plug into the mortgage constant for calculating the payment in the 7 year of the loan 10. The maximum possible rate of interest is

Explanation / Answer

6 Rate Charged in year 3 5% Rate in year1=3%, Year 2: Margin 2 which means Lower of (4+2) or Cap 1 which means (3+1); Rate in year 2=4%, Rate in year 3;Lowest of of (7+2) or (4+1)Rate in year 3=5% 7 Rate Charged in year 5 7% Rate in Year4:Lower of (4+2) or (5+1) . Rate in year4 =6%, Rate in year 5 : Lower of (8+2), or (6+1).Rate in Year 5=7% 8 Rate Charged in year 8 10% Rate in Year6:Lowest of (9+2), or (7+1) Year 6 rate=8%,Year 7 rate is lower of(10+2) or (8+1) .Year 7 rate=9% . Year 8 rate is lower of (10+2) or (9+1) Year 8 rate=10% 9 Number of years for calculating payment in 7th year 9 Years Term of loan=15 years. Number of years left at the beginning of 7th year=(15-6)=9 years 10 Maximum possible rate of interest 10% (3+7)=10%

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