Bonds and Finance

A home buyer borrowed a 5/1 ARM (30 year amortization) with an annual interest rate of 3% fixed for the first five years. The amount of the loan is $600,000. (15 points)
Compute her monthly mortgage payment for the first five years.
In the first month, how much is she paying the interest? How much is she paying the principal?
A home buyer borrowed a 5/1 Interest Only Hybrid ARM (30 year amortization) with an annual interest rate of 3% fixed for the first five years. The amount of the loan is $600,000.(15 points)
Compute her monthly mortgage payment for the first five years.
Suppose after the first five years, the annual interest rate adjusted to 6% for the 6th year into the loan, and she would need to start paying principal. Assuming the homeowner did not make any prepayment during the first five years, how much would be her monthly mortgage payment for the sixth year? In the first month of year 6, how much is she paying in interest? How much in principal?

Sample Solution

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