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an adjustable rate mortgage with a start rate of 3.5%, an index of the 11th district cofi, a margin of 1.5%, and periodic and lifetime caps of 1/5 with semi-annual adjustments, would have a maximum interest rate of what at the end of the fourth loan year if 11th district cofi is 7.5% at that time?

Respuesta :

9.0% is correct because the rate of interest will be lower than 10.45 %, and 9%

         

 1/5 or .2 semi-annual increase      

Semi-Annual Period Semi-Annual Increase  Int. rate      

1 0           5.00      

2 0.2           6.00      

3 0.2           7.20      

4 0.2           8.64      

5 0.2         10.37      

6 0.2         12.44      

7 0.2         14.93                

or  7.5+1.5           9.00

In finance and economics, interest is charged from a borrower or deposit-taking monetary group to a lender or depositor of a quantity above reimbursement of the predominant sum (this is, the amount borrowed), at a selected charge.[1] it is distinct from a fee that the borrower may also pay the lender or some 1/3 birthday party. It is also wonderful from a dividend that is paid by using a company to its shareholders (owners) from its earnings or reserve, but no longer at a selected charge decided ahead, rather on a pro-rata foundation as a share inside the reward received by danger taking marketers while the revenue earned exceeds the full charges.

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