Question

Aimee and Ben are purchasing a condominium and are financing $160,000. The mortgage is a 20 year 3/1 ARM with a cap structure of 1.5/10. What will their payments be for the first 3 years?

Answer 1

Answer:

$1169.45

Step-by-step explanation:

Using the formula:

$P = L \Big( \dfrac{c(1+c)^n}{(1+c^n) -1} \Big)$

where;

Loan amount L = 160000

number of months (n) = 20 × 12 = 240

Lets assume that the interest rate per month c = 6.25% since it is not given.

i.e. (6.25/( 100*12) ) = 5.208 × 10⁻³

∴

$P = 160000 * \dfrac{5.208 *10^{-3} (1+5.208 *10^{-3})^{240}}{(1+5.208 *10^{-3})^{240}-1}$

P = $1169.45