Consider a floating rate mortgage loan of $250,000 for amortization period of 15 years. Assume monthly mortgage payments and mortgage rate reset period every 3 months. The mortgage rate will be reset as follows:
Mortgage rate= the beginning of the period prime rate +3%. Mortgage rate will be compounded monthly.
Suppose the prime rate today is 2.5% per annum while at the beginning of the next quarter it is expected to be 3% annum.
Calculate monthly mortgage payments in the first month and the fourth month of the loan.