Calculate the payment and rate adjustments for the following scenario. 5/1 Interest Only ARM  $600k Loan amount 5% Interest Rate 30 year loan tenure Margin: 2.75 CAPS are 3/2/6 Index: 12 Month Treasury Average    1. What is the payment on this mortgage? 2. If the 5 year fixed period ends this month using the current 12 month Treasury average, what would the fully indexed rate be?  Would it be affected by the CAPS?  I want you to research the web to determine what the current 12 month Treasury average is.  3. If the 12 month Treasury average jumps to 3.75 for next year's adjustment, what is the new rate considering the CAPS?

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Effective Interest Rate

The term interest rate can be defined as the amount that is charged by the lender as a percentage on the principal amount. Interest rate which is charged annually is known as annual percentage rate.