The Following Problem Involves Adjustable-Rate Mortgage

question 66

Multiple Choice

The following problem involves adjustable-rate mortgage. You will need a table of monthly payments.
-Harry has a 1-year ARM for $75,000 over a 25-year term. The margin is 2%, and the index rate starts out at 8.5% and increases to 10% at the first adjustment. The balance of principal at the end of
The first year is $74,113.56. Find the amount of interest owed for the first month of the first year.

• A)$674.79
• B)$531.25
• C)$656.25
• D)None of the above is correct.

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Definitions:

Estimator

A rule or formula that provides a means to calculate an estimate of a given parameter from sample data.

Parameter

A value that summarizes a characteristic of a population or a statistical model.

Confidence Interval

A range of values, derived from sample statistics, that is likely to contain the value of an unknown population parameter, expressed with a certain level of confidence.

Confidence Level

A confidence level is a statistical parameter that expresses how certain one is in the results of a statistical experiment, often represented as a percentage that quantifies the probability that the true parameter lies within the confidence interval.