Karen and Jeremy are purchasing a house and are financing $225,000. The mortgage is a 30-year 4/1 ARM at 3.0% with a 2/6 cap structure. What will the remaining balance be after the first 4 years?

$196,208.00

$210,667.50

$205,335.00

$210,895.73

Question

Karen and Jeremy are purchasing a house and are financing $225,000. The mortgage is a 30-year 4/1 ARM at 3.0% with a 2/6 cap structure. What will the remaining balance be after the first 4 years?

$196,208.00

$210,667.50

$205,335.00

$210,895.73

anonymous · Answer

@amistre64

amistre64 · Answer

well, its asking what remaining balance is to refinance after 4 years .. since the 4/1 tells us that it adjusts after 4 years

amistre64 · Answer

my solution strategy is to determine the payments for a fixed 30 year loan,  and then balance it out after 4 years of making payments

amistre64 · Answer

what are the payments for the loan?

anonymous · Answer

I figured it out it is C. $205,335.00

amistre64 · Answer

let me see if i can get that too

amistre64 · Answer

payments i figure are about 948.61

A = Bk^(4*12)-P(1-k^(4*12))/(1-k),  for some k compounding factors

amistre64 · Answer

http://www.wolframalpha.com/input/?i=225000k%5E%284*12%29-948.61%281-k%5E%284*12%29%29%2F%281-k%29%2Ck%3D1%2B.03%2F12 yep 205335

anonymous · Answer

P = B4 = Bk^(4*12)-P(1-k^(4*12))/(1-k) 

Bk^(4*12)-(Bk^(30*12)(1-k)/(1-k^(30*12)))(1-k^(4*12))/(1-k) 

225000k^(4*12)-(225000k^(30*12)(1-k)/(1-k^(30*12)))(1-k^(4*12))/(1-k), k=1+.03/12

anonymous · Answer

Yes That is how I solved it (:

amistre64 · Answer

yay!!  nice formula lol

anonymous · Answer

THank you so much for your help! :D

amistre64 · Answer

youre welcome

anonymous · Answer

Well I looked through some of your other responses to other people because I just happened upon them... and you used that formula xp So I was like hmmm well I guess I could try that.

anonymous · Answer

Because the one that is given to me is difficult... that one made more sense