A Mortgage Broker Is Offering a 30-Year Mortgage with a Teaser

question 51

Multiple Choice

A mortgage broker is offering a 30-year mortgage with a teaser rate. In the first two years of the mortgage, the borrower makes monthly payments on only a 5 percent APR interest rate. After the second year, the mortgage interest charged increases to 8 percent APR. What is the effective interest rate in the first two years? What is the effective interest rate after the second year?

• A) 4.89 percent, 7.72 percent respectively
• B) 5.00 percent, 8.00 percent respectively
• C) 5.12 percent, 8.30 percent respectively
• D) 12.59 percent, 12.65 percent respectively

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Definitions:

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Social Purpose

The intention to benefit society as a whole, typically guiding an organization or an individual's actions towards achieving socially beneficial goals beyond mere profit or personal gains.

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The movement and efforts aimed at achieving equality and non-discrimination for individuals based on their sexual orientation.