1. You have taken out a $300,000, 5/1 ARM. The initial rate of 5.4% (annual) is locked in for 5 years. Calculate the payment after recasting the loan (i.e., after the reset) assuming the interest rate after the initial lock period is 8.0%. (Note: the term on this 5/1 ARM is 30 years)
A. $1,684.59
B. $1,784.79
C. $1,887.75
D. $2,138.02
2. You have taken out a $225,000, 3/1 ARM. The initial rate of 5.8% (annual) is locked in for 3 years and is expected to increase to 6.5% at the end of the lock period. Calculate the initial payment on the loan. (Note: the term on this 3/1 ARM is 30 years)
A. $1,320.19
B. $1,422.15
C. $1,874.45
D. $1959.99