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Consider a 30-year, two-step mortgage for $275,000.  The initial interest rate is 3.5 percent, but the loan...

  1. Consider a 30-year, two-step mortgage for $275,000.  The initial interest rate is 3.5 percent, but the loan contract calls for a rate adjustment at the end of year 5.  The new rate will be 2 percentage points above the 10-year Treasury bond yield.  The interest rate is capped at 5 percentage points above the initial interest rate.  If the T-bond yield is 5.5% at the time of the adjustment, what will the payments be for the last 25 years of this loan?
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SOLVED WITH BA II PLUS CALCULATOR.

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