Question

Chris and Justine are purchasing a townhouse and finance $112,900 with a 25-year 6/3 ARM at 4.85% with a 2/12 cap structure. What will their payments be at the beginning of the seventh year assuming they are charged the maximum interest rate for that year?

$759.70

$557.09

$674.48

$650.17

Answer 1

@amistre64

I used this formula ->Bm = P[((1+i)^(n*t)-(1-i)^(m))/((1+i)^(n*t)-(1))]

I plugged in
P=112900
I=4.85%/12=0.004041667
N=12
T=25
M=7*12=84

I got http://www.wolframalpha.com/input/?i=112900%5B%28%281%2B0.004041667%29%5E%2812*25%29-%281-0.004041667%29%5E%2884%29%29%2F%28%281%2B0.004041667%29%5E%2812*25%29-%281%29%29%5D


Then I add new info to it

I=0.0685/12 = 0.005708333 <--- ( 4.85 + 2 = 6.85%)
N=12
T-25-6 = 19

and I got http://www.wolframalpha.com/input/?i=112900%5B%28%281%2B0.005708333%29%5E%2812*19%29-%281-0.005708333%29%5E%2884%29%29%2F%28%281%2B0.005708333%29%5E%2812*19%29-%281%29%29%5D

Answer 2

I dont know what to do next..

Answer 3

@thomaster

Answer 4

@ganeshie8