Question

Ben and Marge are purchasing a house with a 20-year, 5/1 ARM for $265,000 at 5.25% with a 3/12 cap structure. What will the difference in payments be from year 5 to year 6?

A. $925.81
B. $880.29
C. $369.32
D. $234.39

Answer 1

d it is d               egryrfgvrftegrfehrfg                                  

Answer 2

Total Amount that has to be paid if total duration for paying money is 20 years = $ 265,000

Rate of interest = 5.25 %(Depreciating rate)

When , time = 5 years

Amount left which is to be paid after 5 years=

`=Principal * [(1-(Rate)/(100))^(time)]\\\\ = 265,000* [(1-(5.25)/(100))^5]\\\\ = 265,000*[((94.75)/(100))^5]\\\\=265,000* (0.9475)^5\\\\ =265,000* 0.763653\\\\ =202368.059`

When, time = 6 years

Amount left which is to be paid after 6 years=

`=Principal * [(1-(Rate)/(100))^(time)]\\\\ = 265,000* [(1-(5.25)/(100))^6]\\\\ = 265,000*[((94.75)/(100))^6]\\\\=265,000* (0.9475)^6\\\\ =265,000* 0.72356\\\\ =191743.7363`

Difference in payments from year 5 to year 6 = $ 202368.059 - $ 191743.73

=$ 10624.329 (approx)

Monthly payment
`=(10624.329)/(12)\\\\ = 885.360`

Option (B) 880. ... is appropriate.