Aimee and Ben are purchasing a condominium and are financing $610,000. The mortgage is a 20-year 3/1 ARM at 4.15% with a cap structure of 1.5/10. What will their payments be for the first 3 years?

$4,247.96

$2,805.36

$2,965.23

$3,744.87

Question

Aimee and Ben are purchasing a condominium and are financing $610,000. The mortgage is a 20-year 3/1 ARM at 4.15% with a cap structure of 1.5/10. What will their payments be for the first 3 years?

 $4,247.96

 $2,805.36

 $2,965.23

 $3,744.87

amistre64 · Answer

the same as if this was just a plain old fixed mortgage

amistre64 · Answer

for the initial period, an ARM and a fixed mortgage are the same ... its afterwards that the ARM needs to be recalculated along the way

amistre64 · Answer

what process comes to mind?

anonymous · Answer

M=B[((i)(1+i)^(n*t))/((1+i)^(n*t)-(1))]

anonymous · Answer

B=
I=
N=
T= 
?

amistre64 · Answer

that does look like a textbook formula for payments .... which i just dont use

amistre64 · Answer

take the initial balance and compound it over the 20 years at the given rate; then scale that by the reciprocal of a geo sum:$$P=B_ok^{12*20}\frac{1-k}{1-k^{12*20}}~:~k=1+r/12$$

amistre64 · Answer

if we use yours:

B=loan amount
I=rate/n
N=12
T= 20

amistre64 · Answer

http://www.wolframalpha.com/input/?i=610000k%5E%2812*20%29%281-k%29%2F%281-k%5E%2812*20%29%29%2C+k%3D1%2B.0415%2F12

anonymous · Answer

how you get the answer so fast with that crazy hard formula ?