this is the question and the suggestion he gave us....
A customer comes in to see you. They want to compare 2 loans, both for $150,000. one is a 1 year ARM starting at 4.5% with a 2% annual cap, and a 6% lifetime cap. The other is a 30 year fixed rate at 7.5% they feel that the market will rise, and want you to calculate what they have paid on each loan for the first 5 years, if the ARM increases its maxium each year.
you will need a financial calculator for this one or try one of the online websites that have loan calculators such as www.bankrate.com
our teacher said to get some help form a our banks lending department and i have tried 4 different banks in the area and none of them were willing to help :(
2006-10-15 13:28:00 · 1 answers · asked by Push_mb20girl 4 in Business & Finance ➔ Personal Finance
Calculate the annual payment for 30 years, $150,000, 7.5%.
Then calculate the annual payment for 30 years, $150,000, 4.5% (the first year of the ARM). Figure out the principal remaining at the end of year one.
The max payment in year two is a 29 year loan, 6.5%, for the remaining principal. Figure out how much is left at the end of year two. Then do it again for year three (now 8.5%) and year four (now at the max ARM rate of 10.5%).
I find Excel is easiest for this type of problem.
2006-10-15 13:59:20 · answer #1 · answered by Jim H 3 · 1⤊ 0⤋