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(Q) A borrower takes out a 5/1 Hybrid ARM for $600,000 with an initial contract interest rate of 5.5%. The interest rate will adjust according to the 1-year LIBOR rate, plus a margin of 2%. At the first reset date, 1-year LIBOR is at 5.5%. What will the borrowers' monthly payment be immediately after the first reset? (State the payment as a positive number. Unless otherwise stated, you can assume 5/1 ARMs have a term of 30 years. Round your answer to 2 decimal places.)
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- Calculating interest and APR of installment loan. Assuming that interest is the only finance charge, how much interest would be paid on a 5,000 installment loan to be repaid in 36 monthly installments of 166.10? What is the APR on this loan?A basic ARM is made for $216,000 at an initial interest rate of 6 percent for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of year (BOY ) 2 will increase to 7 percent. Required: a. Assuming that a fully amortizing loan is made, what will the monthly payments be during year 1? b. Based on (a) what will the loan balance be at the end of year (EOY ) 1? c. Given that the interest rate is expected to be 7 percent at the beginning of year 2, what will the monthly payments be during year 2? d. What will be the loan balance at the EOY 2? e. What would be the monthly payments in year 1 if they are to be interest only?A borrower takes out a 5/1 Hybrid ARM for $450,000 with an initial contract interest rate of 3.5%. The interest rate will adjust according to the 1 yr UST rate, plus a margin of 2%. At the first reset date, 1 yr UST is at 1%. What will the borrowers' monthly payment be immediately after the first reset? (State the payment as a positive number. Unless otherwise stated, you can assume 5/1 ARMs have a term of 30 years. Round your answer to 2 decimal places.)
- basic ARM is made for $220,000 at an initial interest rate of 6 percent for 30 years with an annual resetdate. The borrower believes that the interest rate at the beginning of year (BOY) 2 will increase to 7 percent. Required:a. Assuming that a fully amortizing loan is made, what will the monthly payments be during year 1? b. Based on (a) what will the loan balance be at the end of year (EOY) 1? c. Given that the interest rate is expected to be 7 percent at the beginning of year 2, what will the monthlypayments be during year 2? d. What will be the loan balance at the EOY 2 ? e. What would be the monthly payments in year 1 if they are to be interest only?A basic ARM is made for $180,000 at an initial interest rate of 6 percent for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of the year (BOY) 2 will increase to 7 percent. a. Assuming that a fully amortizing loan is made, what will monthly payments be during year 1? b. Based on (a) what will the loan balance be at the end of the year (EOY) 1? c. Given that the interest rate is expected to be 7 percent at the beginning of year 2, what will monthly payments be during year 2? d. What will be the loan balance at the EOY 2?A basic ARM is made for $200,000 at an initial interest rate of 6 percent for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of the year (BOY) 2 will increase to 7 percent.a. Assuming that a fully amortizing loan is made, what will monthly payments be during year 1?b. Based on (a) what will the loan balance be at the end of the year (EOY) 1?c. Given that the interest rate is expected to be 7 percent at the beginning of year 2, what willmonthly payments be during year 2?d. What will be the loan balance at the EOY 2?e. What would be the monthly payments in year 1 if they are to be interest only?f. Assuming terms in (e), what would monthly interest only payments be in year 2?
- Answer the given problem below. Attach a complete solution. A loan of P5000 is made for a period of 13 months, from January 1 to January 31 the following year, at interest rate of 20%. What future amount is due at the end of the loan period for an (a) ordinary and (b) exact interest rate?A basic ARM is made for $203,000 at an initial interest rate of 6 percent for 30 years with an annual reset date. The borrower believes that the interest rate at the beginning of year (BOY ) 2 will increase to 7 percent. a. Assuming that a fully amortizing loan is made, what will the monthly payments be during year 1? b. Based on (a) what will the loan balance be at the end of year (EOY ) 1? c. Given that the interest rate is expected to be 7 percent at the beginning of year 2, what will the monthly payments be during year 2? d. What will be the loan balance at the EOY 2? e. What would be the monthly payments in year 1 if they are to be interest only?In a discount interest loan, you pay the interest payment up front. For example, if a 1-year loan is stated as $42,000 and the interest rate is 8.50%, the borrower “pays” 0.0850 × $42,000 = $3,570 immediately, thereby receiving net funds of $38,430 and repaying $42,000 in a year. a. What is the effective interest rate on this loan? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.) b. What is the effective annual rate on a 1-year loan with an interest rate quoted on a discount basis of 18.50%? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places.)
- Suppose a borrower makes a $100,000 loan with annual payments at a 10 percent rate and a 10-year term. The loan is fully amortizing; however, payments are made on an annual basis to simplify the initial illustration. How the annual loan payment is calculated?A floating rate mortgage loan is made for $155,000 for a 30 -year perlod at an Initial rate of 12 percent interest. However, the borrower and lender have negotlated a monthly payment of $1,240. Required: a. What will be the loan balance at the end of year 1 ? b. If the interest rate increases to 13 percent at the end of year 2 , how much is the payment plus negative amortization in year 2 and year 5 if the payment remains at $1,240 ?a) You expect to incur a cost and make a payment of £35,000 in one year. You areplanning to take a loan then to cover the expense, and repay the loan a one yearlater. Currently, a one-year and two-year interest rates are 1.15% and 1.25%,respectively. What forward rate would you expect to be applicable to your loan? Ifthere was a forward rate agreement available in the market, offering 1.2% over aone-year period starting in one year from now, would you use it? Explain.Assuming you did enter into this agreement, analyse the relevant gains or losses.
