Question

A 3/1 ARM is made for $150,000 at 7% with a 30 year maturity. Assuming that fixed payments are to be made monthly for three years and that the loan is fully amortizing, what will be the monthly payments?

Answer 1

Answer:

Monthly paymenty for  $ 997.954

Explanation:

We have to calcualte for the PTM of the mortgage for the first three years at which the rate is fixed:

$PV \div \frac{1-(1+r)^{-time} }{rate} = C$

PV $150,000

time 360 (30 years x 12 months)

rate 0.005833333 (7% annual / 12 months)

$150000 \div \frac{1-(1+0.005833)^{-360} }{0.005833} = C$

C  $ 997.954