Need solution to these 4 problems
On March 15, 2011. the average adjustable interest rate (ARM) was 3.39%. The adjustable rate is linked to an economic index. The interest rates, and your payments, are periodically adjusted up or down as the economic index fluctuates. This rate is often fixed for a period of time. Most home buyers decide to refinance at the fixed rate because it can go up by as much as 6%. The first 5 years of an ARM has an interest rate of 3.39%. Calculate what the monthly payment would be for the first 5 years on a loan amount of $ 150,000. When you calculate your monthly payment, you will assume that the loan is amortized, or calculated, for 30 years. Make sure you plug in a t value representing 30 years. After the first 5 years, the interest rate will begin to fluctuate with the market, so it is a good time to refinance your loan at a fixed interest rate. Your monthly payments with the ARM went to paying the interest and the principle on the loan and you have a new loan balance of $134,289.86. It will cost you $3000 to refinance. You can refinance your new balance + $3000 refinance fee at 4.85% fixed interest rate. 8.Calculate the next 25 years monthly payment on the remaining balance of the house + refinance fee, at a 4.85% interest rate. Make sure you plug in a t value representing 25 years. Compute the total amount paid over the 30 year loan. Was it more beneficial to do an ARM with this cost added? Explain your answer.
Show transcribed image text On March 15, 2011. the average adjustable interest rate (ARM) was 3.39%. The adjustable rate is linked to an economic index. The interest rates, and your payments, are periodically adjusted up or down as the economic index fluctuates. This rate is often fixed for a period of time. Most home buyers decide to refinance at the fixed rate because it can go up by as much as 6%. The first 5 years of an ARM has an interest rate of 3.39%. Calculate what the monthly payment would be for the first 5 years on a loan amount of $ 150,000. When you calculate your monthly payment, you will assume that the loan is amortized, or calculated, for 30 years. Make sure you plug in a t value representing 30 years. After the first 5 years, the interest rate will begin to fluctuate with the market, so it is a good time to refinance your loan at a fixed interest rate. Your monthly payments with the ARM went to paying the interest and the principle on the loan and you have a new loan balance of $134,289.86. It will cost you $3000 to refinance. You can refinance your new balance + $3000 refinance fee at 4.85% fixed interest rate. 8.Calculate the next 25 years monthly payment on the remaining balance of the house + refinance fee, at a 4.85% interest rate. Make sure you plug in a t value representing 25 years. Compute the total amount paid over the 30 year loan. Was it more beneficial to do an ARM with this cost added? Explain your answer.