Solve the Problem $5 \%$ And an ARM with a First-Year Rate Of

question 95

Multiple Choice

Solve the problem.
-You have a choice between a 30 -year fixed rate loan at $5 \%$ and an ARM with a first-year rate of $2 \%$ . The ARM rate rises to $6.5 \%$ at the start of the third year. Neglecting compounding and changes in principal, estimate your monthly savings with the ARM during the first year on a $\$ 180,000$ loan.

• A) \(\$ 430\)
• B) \(\$ 450\)
• C) \(\$ 470\)
• D) \(\$ 500\)

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