Use the Below Information to Answer the Following Questions) -What Is the Expected Opportunity Loss for the 1-Year ARM

question 16

Multiple Choice

Use the below information to answer the following questions) . Below is a payoff table with three mortgage options: $$\begin{array} { | l | l | c | c | } \hline & &{ \text { Outcame } } \\\hline \text { Probability } & { 0.6 } & { 0.3 } & { 0.1 } \\\hline \text { Decision } & \text { Rates Rise } & \text { Rates Stable } & \text { Rates Fall } \\\hline \text { 1-year ARM } & \$ 66,645 & \$ 43,650 & \$ 38,560 \\\hline \text { 3-year ARM } & \$ 62,857 & \$ 47,698 & \$ 42,726 \\\hline \text { 30-year fixed } & \$ 52,276 & \$ 52,276 & \$ 52,276 \\\hline\end{array}$$
-What is the expected opportunity loss for the 1-year ARM?

• A) $ 7,979.60
• B) $ 3,959.40
• C) $ 6,853.50
• D) $ 8,621.40

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