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A borrower takes out a 25-year adjustable rate mortgage loan for $540,000 with monthly payments. The...

A borrower takes out a 25-year adjustable rate mortgage loan for $540,000 with monthly payments. The first 5 years of the loan have a “teaser” rate of 4%, after that, the rate can reset with a 3% annual rate cap. On the reset date, the composite rate is 6%. What would the Year 6 (after 5 years; 20 years left) monthly payment be?

Group of answer choices

A) $3,369.84

B) $3,407.02

C) none of the answers is correct

D) $3,235.05

E) $1,703.51

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