Question

Janie obtains a 30-year 5/2 ARM at 3% with a 3/7 cap structure in the amount of $164,500. What is the monthly payment during the initial period?

$456.94

$693.54

$780.08

$883.07

Answer 1

During the initial period, the interest is 3% and it will not change until the second year and it can only be changed 5 times until it reached 7%. But for a 3% interest rate and an amount of $164,500, the monthly payment is
$164,500 (0.03)(1 + 0.03)^30 / ((1 + 0.03)^30 - 1) = $883.07