In this excel problem, you are being asked to calculate the effective borrowing cost (rate) of an
adjustable rate mortgage assuming you live in the house till the loan matures under the following
eight (8) scenarios:
1. Index rises 1/4% every year
2. Index rises 1/2% every year
3. Index rises 3/4% every year
4. Index rises 1% every year
5. Index rises 2% every year
6. Index falls 1/4% every year
7. Index falls 1/2% every year
8. No change in index
A description of the 1-year ARM with monthly payments is as follows: Amount: $100,000 Maturity:
15 years Points: 2 Closing Costs: 4% Initial Contract Rate (teaser): 6.75% Margin: 125 bps (1basis
point = 0.01%) Current Index Yield: 4% Caps and Floors: Annually: 1%, Lifetime: 5% Excel must
be used.
In this excel problem you are being asked to calculate the .pdf
1. In this excel problem, you are being asked to calculate the effective borrowing cost (rate) of an
adjustable rate mortgage assuming you live in the house till the loan matures under the following
eight (8) scenarios:
1. Index rises 1/4% every year
2. Index rises 1/2% every year
3. Index rises 3/4% every year
4. Index rises 1% every year
5. Index rises 2% every year
6. Index falls 1/4% every year
7. Index falls 1/2% every year
8. No change in index
A description of the 1-year ARM with monthly payments is as follows: Amount: $100,000 Maturity:
15 years Points: 2 Closing Costs: 4% Initial Contract Rate (teaser): 6.75% Margin: 125 bps (1basis
point = 0.01%) Current Index Yield: 4% Caps and Floors: Annually: 1%, Lifetime: 5% Excel must
be used
