can anyone help me with advanced algebra with financial applications?

Question

anonymous · Answer

A bank advertises a 4/3 ARM at 6.35% with a 5/10 cap.
What is the maximum interest rate that can be charged during the fifth year

jim_thompson5910 · Answer

When it says "4/3 ARM" that means that for the first 4 years, the interest rate is fixed at 6.35% (that's where the "4" comes in)

then the interest will increase every 3 years (so that's what the "3" stands for)

jim_thompson5910 · Answer

So for the first four years, the interest is 6.35%

after year 4, the interest will be increased by 5% (from the "5" in "5/10")

so the interest rate will become 6.35% + 5% = 11.35%

jim_thompson5910 · Answer

because year 5 is in this period, that means that 11.35% is the interest rate for year 5

anonymous · Answer

oh ok that's what I got