Question

Jacey obtains a 30-year 6/2 ARM at 4% with a 2/6 cap structure in the amount of $224,500. What is the monthly payment during the initial period?

Answer 1

The answer is $1,071.80.

Answer 2

General Idea:

We need to make use of the below formula to find the monthly payment..

`Monthly \; Payment\; =\; (P * (r)/(12))/((1-(1+(r)/(12))^(-m))) \\ \\ Where:\\ P\; is\; Principal\\ r\; is\; rate\; in\; decimal\; form\\ m\; is\; number\; of\; monthly\; payments`

Applying the concept:

Given:

`P=\$224,500\\ r=4\%=0.04\\ m=30\; year * 12 \; months/year=360\\`

Substituting the given in the formula we will get the monthly payment.

`Monthly\; Payment\; =\; (224500 * (0.04)/(12))/((1-(1+(0.04)/(12))^(-360))) =((8980)/(12))/((1-0.301796)) =(748.3333)/(0.698204) \\ \\ Monthly \; Payment= \$1071.7975`

Conclusion:

The monthly payment during the initial period is $1072.