The Following Problem Involves Adjustable-Rate Mortgage

question 159

Multiple Choice

The following problem involves adjustable-rate mortgage. You will need a table of monthly payments.
-Suppose your mortgage is $75,000 for 20 years. The index rate is 6.5% and the margin is 2.5%. Find the initial monthly payment.

• A)$674.79
• B)$487.50
• C)$675.00
• D)None of the above is correct.

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Definitions:

Rationing Function

The ability of market prices to allocate scarce resources among competing uses, ensuring that only those willing and able to pay the price can obtain the good or service.

Equilibrium Economic Rent

The additional income received by a factor of production, due to its scarcity or unique value, when the market is in equilibrium.

Farmland

Land dedicated to agricultural practices including the cultivation of crops and raising livestock, a critical resource for food production.

Incentive Function

The role of incentives or rewards in influencing individuals' or entities' behavior towards achieving certain goals or outcomes.