A borrower takes out a "hybrid mortgage loan" for $200,000 with monthly payments. This loan combines elements of fixed-rate mortgage (FRMs) for periods of 2 years, after whichinterest rates are reset and the loan becomes an adjustable mortgage (ARM). The amortization period is 30 years. The first two years of the loan have a "teaser" rate of 4%. After that, the interest rate can reset with a 2% annual interest rate cap. Assume that on the reset date, the composite rate (i.e., the market index plus the margin) is 5%. What would the Year 3 monthly payment be?
Is it
955?
1067?
1071?
1186?