what is ARM and the solution of 3rd type
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Ans is option A
A. 30 year fixed
– 100000 pv
5/12 i/y
N 30*12=360
Cpt pmt 536.82162
B. 20 year fixed
4.385/12 i/y
20*12= 240 N.
Cpt pmt 626.46864
C. 30 year ARM
As it’s changing and it remains same
So first calculate the fv after 3 years as it remains constant after that then we can calculate pmt .
-100000 pv
3.750/12 i/y
3*12=36 N
Cpt fv 111887.5971 sto 1
Now this is the loan amount for 27 years
Pv RCL 1
5.5/12 i/y
27*12=324
Cpt pmt 663.64650
I hope this helps you
but in ans loan payment after 3 years is 559.16 for ARM not 663.64
N = 12 × 30 = 360, I/Y = (3.75/12) = 0.31250, PV = 100,000, FV = 0, calculate PMT = 463.12.
K is found in two steps:
First, the balance at end of Year 3 is found: N = 12 × 27 = 324, I/Y = (3.75/12) = 0.31250, FV = 0, PMT = 463.12, calculate PV = 94,271.43.
Then, K is calculated as follows: N = 324, I/Y = (5.5/12) = 0.45833, PV = 94,271.43, FV = 0, calculate PMT = 559.16