# Larry and Cindy Lynden purchased a townhome in Alison Estates with an adjustable-rate mortgage. The lender's margin on the loan is 4.1 % and the overall rate cap is 5 % over the life of the loan. The current index rate is the prime rate, 3.25%. a. What is the calculated interest rate of the ARM? Calculated ARM interest rate = Index rate + Lender's margin Calculated ARM interest rate = 3.25 + 4.1 = 7.35 _ _ % b. What is the maximum overall rate of the loan? Maximum overall ARM rate = Initial rate + Overall rate cap Maximum overall ARM rate = 7.35 + 5.0 = 12.35 _ _ %

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
Publisher: Cengage Learning
ISBN: 9781305585447

### Contemporary Mathematics for Busin...

8th Edition
Robert Brechner + 1 other
Publisher: Cengage Learning
ISBN: 9781305585447

#### Solutions

Chapter 14.I, Problem 19RE
Textbook Problem

## Expert Solution

### Want to see the full answer?

Check out a sample textbook solution.

### Want to see this answer and more?

Experts are waiting 24/7 to provide step-by-step solutions in as fast as 30 minutes!*

*Response times vary by subject and question complexity. Median response time is 34 minutes and may be longer for new subjects.