Chapter 14.I, Problem 5TIE

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8th Edition

Robert Brechner + 1 other

ISBN: 9781305585447

Textbook Problem

Kate Fitzgerald bought a home with an adjustable-rate mortgage. The lender’s margin on the loan is

a. What is the initial interest rate of the ARM?

b. What is the maximum overall rate of the loan?

**(a)**

To determine

**To calculate:** The current interest rate of the adjustable rate mortgage and the maximum overall rate of return and lender’s margin on the loan at the rate of 3.4%, the overall cap rate is 7% and the current index rate is 3.4 %.

Explanation

**Given Information:**

The information given in the question is the lender’s margin on the loan at the rate of 3.4%, the overall cap rate is 7% and the current index rate is 3.4 %.

**Formula used:**

The current interest rate of the ARM can be calculated in the following manner:

**Calculation:**

Consider the provided data the lender’s margin on the loan at the rate of 3

**(b)**

To determine

**To calculate:** The current interest rate of the adjustable rate mortgage and the maximum overall rate of return and lender’s margin on the loan at the rate of 3.4%, the overall cap rate is 7% and the current index rate is 3.4 %.

Sect-14.I P-1TIESect-14.I P-2TIESect-14.I P-3TIESect-14.I P-4TIESect-14.I P-5TIESect-14.I P-1RESect-14.I P-2RESect-14.I P-3RESect-14.I P-4RESect-14.I P-5RE

Sect-14.I P-6RESect-14.I P-7RESect-14.I P-8RESect-14.I P-9RESect-14.I P-10RESect-14.I P-11RESect-14.I P-12RESect-14.I P-13RESect-14.I P-14RESect-14.I P-15RESect-14.I P-16RESect-14.I P-17RESect-14.I P-18RESect-14.I P-19RESect-14.I P-20RESect-14.I P-21RESect-14.I P-22RESect-14.II P-6TIESect-14.II P-7TIESect-14.II P-1RESect-14.II P-2RESect-14.II P-3RESect-14.II P-4RESect-14.II P-5RESect-14.II P-6RESect-14.II P-7RESect-14.II P-8RESect-14.II P-9RESect-14.II P-10RESect-14.II P-11RESect-14.II P-12RESect-14.II P-13RESect-14.II P-14RESect-14.II P-15RESect-14.II P-16RESect-14.II P-17RESect-14.II P-18RESect-14.II P-19RESect-14.II P-20RESect-14.II P-21RESect-14.II P-22RECh-14 P-1CRCh-14 P-2CRCh-14 P-3CRCh-14 P-4CRCh-14 P-5CRCh-14 P-6CRCh-14 P-7CRCh-14 P-8CRCh-14 P-9CRCh-14 P-10CRCh-14 P-11CRCh-14 P-12CRCh-14 P-13CRCh-14 P-14CRCh-14 P-1ATCh-14 P-2ATCh-14 P-3ATCh-14 P-4ATCh-14 P-5ATCh-14 P-6ATCh-14 P-7ATCh-14 P-8ATCh-14 P-9ATCh-14 P-10ATCh-14 P-11ATCh-14 P-12ATCh-14 P-13ATCh-14 P-14ATCh-14 P-15ATCh-14 P-16ATCh-14 P-17ATCh-14 P-18ATCh-14 P-19ATCh-14 P-20ATCh-14 P-21ATCh-14 P-22AT

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