You Have Taken Out a $300,000, 5/1 ARM

question 8

Multiple Choice

You have taken out a $300,000, 5/1 ARM. The initial rate of 5.4% (annual) is locked in for 5 years. Calculate the payment after recasting the loan (i.e., after the reset) assuming the interest rate after the initial lock period is 8.0%. (Note: the term on this 5/1 ARM is 30 years)

• A) $1,684.59
• B) $1,784.79
• C) $1,887.75
• D) $2,138.02