You are looking to finance your home. The bank is offering a three-year ARM (adjustable-rate mortgage) with an introduct

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answerhappygod
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You are looking to finance your home. The bank is offering a three-year ARM (adjustable-rate mortgage) with an introduct

Post by answerhappygod »

You are looking to finance your home. The bank is offering a
three-year ARM (adjustable-rate mortgage) with an introductory rate
of 3.5%. It has an adjustment cap of 3% per adjustment period, with
a lifetime adjustment of 8%. The rate is 4% over the one-year LIBOR
rate, which is currently 1.25%. (LO 7-3)
c. If LIBOR increases 1% per year for the next 10 years, up to
11.25%, what is the maximum interest rate you will pay?
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