Question

A 3/1 ARM is made for $150,000 at 7% with a 30 year maturity. Assuming that fixed payments are to be made monthly for three years and that the loan is fully amortizing, what will be the monthly payments?

Answer 1

Monthly paymenty for $ 997.954

Step-by-step explanation:

We have to calcualte for the PTM of the mortgage for the first three years at which the rate is fixed:

`PV / (1-(1+r)^(-time) )/(rate) = C\\`

PV $150,000

time 360 (30 years x 12 months)

rate 0.005833333 (7% annual / 12 months)

`150000 / (1-(1+0.005833)^(-360) )/(0.005833) = C\\`

C $ 997.954