Suppose You Have a 30-Year ARM with an Original Loan

question 13

Multiple Choice

Suppose you have a 30-year ARM with an original loan balance of $125,000,monthly payment in year one of $874.02 and monthly payment in year two of $1003.36,and a contract rate in year two of 9%.If the loan is repaid at the end of year two,what amount of discount points should the lender have charged to earn an effective yield of 10.17%?

• A) 2.85 points
• B) 3.51 points
• C) 3.75 points
• D) 8.22 points
• E) 9.18 points

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