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

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Definitions:

Huntington Disease

A genetic neurodegenerative disorder that affects muscle coordination and leads to cognitive decline and psychiatric problems.

Myasthenia Gravis

An autoimmune disorder that weakens skeletal muscles due to a breakdown in communication between nerves and muscles.

Electrical Charge

A fundamental property of matter that leads to electromagnetic force between objects. The charge can be positive or negative and is measured in coulombs.

Electrons

Negatively charged subatomic particles that orbit the nucleus of an atom.