The table shows the specifications of an adjustable rate mortgage​ (ARM). Assume no caps apply. Find​ a) the initial monthly​ payment; b) the monthly payment for the second​ adjustment; and​ c) the change in monthly payment at the first adjustment.

Question

​*The principal balance at the time of the first rate adjustment.
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Part 1
Beginning Balance
​$
Term
20 years
Initial index rate
​%
Margin
​%
Adjustment period
1 year
Adjusted index rate
​%
​*Adjusted balance
​$

Answer 1

To determine the initial monthly payment for an adjustable rate mortgage (ARM), you would need the following information:

- Principal balance: This is the original amount borrowed for the mortgage.
- Term: The length of time for the mortgage, in this case, 20 years.
- Initial index rate: This is the starting interest rate based on the index it is tied to.
- Margin: The additional interest added to the index rate to determine the overall interest rate.
- Adjustment period: The frequency at which the interest rate adjusts, in this case, every 1 year.
- Adjusted index rate: The index rate after the first adjustment period.
- Adjusted balance: The principal balance at the time of the first rate adjustment.

Without the specific values for these variables, it is not possible to calculate the initial monthly payment, the monthly payment for the second adjustment, or the change in monthly payment at the first adjustment.