Raylan Givens borrows $150,000 to buy a house. The adjustable rate mortgage carries a 1.5 percent rate for the first 3 years. After that the rate will change annually to reflect market conditions. The annual cap is 2% (i.e., the largest increase in any year is 2%). The loan term is 30 years and payments are made monthly.
1) What is Raylan’s initial mortgage payment?
a. $417
b. $518
c. $554
d. $632
e. $674
2) What is the remaining balance on the loan after three years?
a. $108,475
b. $115,358
c. $131,352
d. $137,935
e. $142,048
3) What is the greatest mortgage payment Raylan might owe when the interest rate resets at the beginning of the 4th year?
a. $509
b. $699
c. $551
d. $619
e. $659