Consider the following information regarding an ARM loan: the index for year one

Question

Consider the following information regarding an ARM loan: the index for year one is 6%, the index for year two is 7%, the index for year three is 7%, the margin is 2%, the lifetime cap is 6%, the annual cap is 2%, and the first-year-only teaser is -1%. The maximum interest rate allowable during the life of the mortgage is

Consider the following information regarding an ARM loan: the index for year one is 696, the index for year two is 7%, the index for year three is 7%, the margin is 2%, the lifetime cap is 6%, the annual cap is 2%, and the first- year-only teaser is-196. The maximum interest rate allowable during the life of the mortgage is Select one: a. 11% b. 13% c. 15% d. 12%

Explanation / Answer

b) 13%

= 7-2+6+2 = 13%

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