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QUESTION
10. An ARM adjusts annually, has a 1% periodic cap and a 3% lifetime cap, a 30-day average LIBOR index, a margin of 250 basis points, and a going-in teaser rate of 5.0%. What is the interest rate for years 2 through 5 if the periodic adjustment is made from the teaser rate and if our indexed LIBOR average is at 3.5% at loan inception and at 4.5%, 5.0%, 6.5%, and 7.0% for years 2-5 respectively ?
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