Question

* CORRECT ME 4 MEDAL *

Fiona is purchasing a condominium and is financing $305,000 with a 30-year 5/1 ARM at 4.65% with a 1/12 cap structure. What will her payments be at the beginning of year 6?

$1436.86

$1572.69 <-----

$1608.51

$1736.26
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*MY WORK*
http://www.wolframalpha.com/input/?i=305000k%5E%2812*30%29%281-k%29%2F%281-k%5E%2812*30%29%29%2C+k%3D1%2B.0465%2F12

Answer 1

unfortunately wolfram alpha is not the best tool to deal with ARMs (which are a pain and a bit confusing), so use this calculator

http://www.calcxml.com/calculators/adjustable-rate-mortgage-calculator

Answer 2

:c so my answer is wrong ?

Answer 3

yes unfortunately it is

use the calculator I provided

Answer 4

the strategy is to calculate the payment for a fixed 30 year loan

run that to 5 years to define the balance needed to restructure the loan for the 6th year.

use the balance and the remaining time left to calcuate the payment for the new periods rate

Answer 5

$305,000 with a 30-year 5/1 ARM at 4.65%:\[P_o=B_ok^{30*12}\frac{1-k}{1-k^{30*12}}~:~k=1+.0465/12\]
determine the balance after 5 years:\[B_5=B_ok^{12*5}-P_o\frac{1-k^{12*5}}{1-k}~:~k=1+.0465/12\]
use B5 to restructure that payments for 30-5 years, at an extra % (5.65):
\[P_1=B_5k^{25*12}\frac{1-k}{1-k^{25*12}}~:~k=1+.0565/12\]

Answer 6

excel can make easy work of the processes

Answer 7

So for 6years I just plug in the 6 ?

Answer 8

no, i already worked it out for the durations .... you just need to use the appropriate P and B values

Answer 9

when i use these formulas in a useful manner with excel i get this

Answer 10

i get the same results as jims online tool

Answer 11

your work is just the first part of it ... you found the payments for the first 5 years :)