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% Assume the index goes as follows: Yr. 1-4%, Yr. 2 = 4%, Yr. 3 796, Year #4-496, Year #5 = 8%, Yr. 6 = 9%, Yr. 7-10%, Yr. 8-10% Caps are 196/7% 15 year term 6. What is the rate charged in Year #3 7, What is the rate charged in Year #5 8, What is the rate charged in Year #8 9. How many years would you plug into the mortgage constant for calculating the payment in the 7th year of the loan 10. The maximum possible rate of interest is

Explanation / Answer

Year Index Rate Margin Required Rate Actual Rate

1 4% 2% 6% 3%

2 4% 2% 6% 4%

3 7% 2% 9% 5%

4 4% 2% 6% 6%

5 8% 2% 10% 7%

6 9% 2% 11% 8%

7 10% 2% 12% 9%

8 10% 2% 12% 10%

6Ans.Rate charged in year 3 is 5%

7Ans. Rate charged in year 5 is 7%

8Ans. Rate charged in year 8 is 10%

9Ans. 8 Years

10AnsThe maximum possible rate of interest rate is 10%

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