The Following Problem Involves Adjustable-Rate Mortgage

question 250

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. If the monthly payment for the first year is $708.14, how much more will
His monthly payment be for the second year?

• A)$114.00
• B)$47.31
• C)$77.75
• D)None of the above is correct.

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Definitions:

Serial-Position Effect

A phenomenon in memory studies where items at the beginning and end of a list are remembered more easily than those in the middle.

Procedural Memory

A type of long-term memory that involves the unconscious memory of how to perform different actions and skills.

Frontal Lobe

The frontal lobe is a part of the brain located at the front of each cerebral hemisphere, responsible for voluntary movement, expressive language, and managing higher level executive functions.

Short-Term Memory Tasks

Cognitive tasks that require the temporary holding and processing of information over a short period, typically seconds to a minute.