Question

Today is October 1, 2XX1. Justine has just bought a home in beautiful Rockford, IL. The selling price of home was $310,000. Justine made a down payment of 20% and borrowed the balance. She was able to negotiate a 2-year ARM with an initial teaser rate of 2.00% and subsequent annual rates equal to the current 90-day T-Bill rate on the loan’s anniversary date (October 1) plus 1.10%. The loan is for 30 years with annual and lifetime caps of 1 and 5, respectively. The floor is equal to the teaser rate.

The following information may prove helpful:
90-day T-Bill rates:
October 1, 2XX1          2.00%
October 1, 2XX2          2.20%
October 1, 2XX3          2.40%
October 1, 2XX4          2.50%

What are Justine's monthly payments during Year 3 of the loan:

A. 1,056.73

B. 1,037.65

C. 1,767.34

D. 919.65

Answer 1

....