24 Work this problem:   Assume that a lender offers a 20-yea…

24 Work this problem:   Assume that a lender offers a 20-year, $175,000 adjustable-rate mortgage (ARM) with the following terms:                         Initial interest rate = 8 percent                         Index = 1-year Treasuries                         Payments reset each year                         Margin = 1.5 percent                         Interest rate cap = 1 percent annually; 3 percent lifetime                         Discount points = 2 percent                         Negative amortization allowed             Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows:  Beginning of year (BOY) 2 = 7 percent; (BOY) 3 = 8.5 percent;               Compute the payments, loan balances, and yield for the ARM for the three-year period.   A. Year one payment; Loan balance  B. Year two payment; Loan balance  C. Year three payment; Loan balance  D.  What is the yield if the loan is repaid after  3 years

For problems 2, 3, 4 and 5, answer 3 of these questions. (Wr…

For problems 2, 3, 4 and 5, answer 3 of these questions. (Write “SKIP” to the one you do not want graded) The Bank A is promising to pay 8% compounded Quarterly.  Bank B is across the street.  However, Bank B quotes its rates as compounded monthly.   What rate must bank B advertise (compounded monthly) so that depositors are indifferent between the 2 banks?   (in other words, 8% compounded quarterly is the same as X% compounded monthly).

For problems 2, 3, 4 and 5, answer 3 of these questions. (Wr…

For problems 2, 3, 4 and 5, answer 3 of these questions. (Write “SKIP” to the one you do not want graded) You want to save $2,000,000 for retirement. You expect that you can safely earn 6% per year. You already have save 85,000  If you can deposit $15,257.30, how much longer will you have to wait until you will be able to retire?