Question

Rachel is purchasing a condominium and is financing $485,000 with a 30-year 6/1 ARM at 4.95% with a 1/10 cap structure. What will her payments be at the beginning of year 7?

Answer 1

$2845.65

Explanation:

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Answer 2

Answer: Rachel's payment will be $2,588.78

Explanation:

Given that;

Loan amount L = $485,000

number of months n = 30 × 12 = 360

Interest rate per month C = 4.95 / (100 × 12) = 4.95/1200 = 0.004125

Now, using the formula

P = L[ c ( 1 + c )ⁿ / ( 1 + c )ⁿ - 1 )

we substitute

P = 485,000 × [ 0.004125 ( 1 + 0.004125 )³⁶⁰ / ( 1 + 0.004125 )³⁶⁰ - 1 )]

P = 485,000 × [ 0.01815619 / 3.4015 ]

P = 485,000 × 0.0053377

p = 2,588.78

Therefore, Rachel's payment will be $2,588.78