Solve the Problem. -You Need a Loan of $120,000 to Buy a Home

question 170

Multiple Choice

Solve the problem.
-You need a loan of $120,000 to buy a home. You have a choice between a 30-year fixed rate loan at 3% and an ARM with a first-year rate of 2%. Suppose that the ARM rate rises to 5.5% at the start of
The third year. Neglecting compounding and changes in principal, estimate how much extra you
Will be paying per month during the third year of the ARM over what you would have paid if you
Had taken the fixed rate loan.

• A)$220
• B)$250
• C)$230
• D)$240

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Definitions:

Maintenance Department

The division within an organization responsible for the upkeep, repair, and servicing of equipment and facilities.

Fixed Costs

Outgoings that remain invariable, regardless of operational output or sales numbers, encompassing costs like rent, employee pay, and safeguarding premiums.

Long-run Average Demand

is the average demand forecasted over a longer period, helping in strategic planning and capacity decisions.

Order Fulfillment Department

A unit within a company responsible for processing customer orders, ensuring products are delivered to customers efficiently and satisfactorily.