Vernon has obtained a $105,000, 5/1 30-year ARM at 5%. During the first 3 years, he has an option of paying interest only. If he accepts this offer, what would be his initial payment?
A) $756.92
B) $437.50
C) $587.50
D) $563.66
@thesmartone
@amistre64 or anyone?!

Question

amistre64 · Answer

would this mean that his monthly payment only covers the interest accrued?

anonymous · Answer

@amistre64 i think so? Im not sure. Im sorry

amistre64 · Answer

he has an option of .....paying .......interest .........only

the balance compounds ina month, and the payment covers the increase.  how much does it increase the first month

amistre64 · Answer

if you dont hav a calculator just tell me how we determine the interest that gets added

anonymous · Answer

@amistre64 $105,000?

amistre64 · Answer

105000 is what we start with

if we compound this after a month and pay off the excess (pay off the interest only) .. how much have we paid?

amistre64 · Answer

5% interest compounded monthly gives us what in interest for a month?

anonymous · Answer

@amistre64 63,000?

amistre64 · Answer

thats not even one of the options ...

tell me you think we would setup something to find the solution for us.

anonymous · Answer

The amount he pays .. Im not sure . I dont get the question at all /: @amistre64

amistre64 · Answer

if you are telling me that you have absolutely no idea how to find the interest on a balance ... then theres not much i can do for you.

If you have no utter recollection on how to compound interest for an account, then i dont even know where to start to help you out.

amistre64 · Answer

if you can find me a formula for it, i can work you thru it ... other than that, ive got nothing.

anonymous · Answer

K well thanks @amistre64