A bank advertises a 6/4 ARM at 4.85% with a 6/13 cap. What is the maximum interest rate that can be charged during the seventh year?

Question

amistre64 · Answer

this is all about being able to read the notation given

amistre64 · Answer

what does the 6/4 tell us?

what does the 6/13 tell us?

anonymous · Answer

im not sure

anonymous · Answer

do you know @amistre64

amistre64 · Answer

well, thats the object of the question is to get you to apply what you should have already covered :)

the first 'fraction' tells us something about years to adjust with

the second one tells us how to adjust the rate

amistre64 · Answer

6/4 tells us 

for the first 6 years, nothing happens;  after that we can adjust it every 4 years

amistre64 · Answer

the 6/13  tells us

that we can up the rate 6 points per adjustment; but the total adjustments cannot exceed 13 points

anonymous · Answer

ok keep going please

amistre64 · Answer

thats all there is to it.  when does 7 years fall?  and how many points can we adjust it?

anonymous · Answer

umm here are the choices: a. 10.85% b.4.85% c.17.85% d.8.85%

amistre64 · Answer

the solution comes at the end of it :)

anonymous · Answer

haha its a lil hard for me tho

amistre64 · Answer

if you cant determine if 7 years if more or less than 6 years ... then theres not much more i can do

anonymous · Answer

haha its oviously more

amistre64 · Answer

good, then we are in an adjusted period:  how much is the adjustment able to go?

amistre64 · Answer

|dw:1399998393179:dw|