Question

Stella is purchasing a house and finances 240650 of the purchase price the mortgage is a...

Stella is purchasing a house and finances 240650 of the purchase price the mortgage is a 25 year 6/2 Arm at 5.5% with a 3/10 cap structure. What will the remaining balance be after the first six years?

Homework Answers

Answer #1

ARM stands for adjustable rate mortgage
I think that 6/2 ARM means the first 6 years are fixed and then the rate can be adjusted every 2 years after that 3/10 means that the payments are made every 3 weeks which is 10 times a year.
The payments will stay the same unless the interest rate changes and that does not appeared to have happened.
so
this appears to be a present value of an ordinary annuity question.
A = R * a angle n at i
where
angle n at i = [ 1- ( 1 + i ) -n ] / i
A = $240650
n = 25*10 = 250
i = 0.055 / 10
R = that is what we have to find.
so
angle n at i = (1-(1+0.055/10)^-250)/(0.055/10) = $ 135.673827088

(1-(1+0.055/10)^-250)/(0.055/10)

A = R * a angle n at i
240650 = R * 135.673827088

R = 240650 / 135.673827088

so the 3 weelkly payment will be $ 1,773.739

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