Question

Ben and Marge are purchasing a house with a 20-year, 5/1 ARM for $265,000 at 5.25% with a 3/12 cap structure. What will the difference in payments be from year 5 to year 6?
A. $925.81
B. $880.29
C. $369.32
D. $234.39

Answer 1

d it is d               egryrfgvrftegrfehrfg                                  

Answer 2

Total Amount that has to be paid if total duration for paying money is 20 years = $ 265,000

Rate of interest = 5.25 %(Depreciating rate)

When , time = 5 years

Amount left which is to be paid after  5 years=

 $=Principal \times [(1-\frac{Rate}{100})^{time}]\\\\ = 265,000\times [(1-\frac{5.25}{100})^5]\\\\ = 265,000\times[(\frac{94.75}{100})^5]\\\\=265,000\times (0.9475)^5\\\\ =265,000\times 0.763653\\\\ =202368.059$

When, time = 6 years

Amount left which is to be paid after 6 years=

 $=Principal \times [(1-\frac{Rate}{100})^{time}]\\\\ = 265,000\times [(1-\frac{5.25}{100})^6]\\\\ = 265,000\times[(\frac{94.75}{100})^6]\\\\=265,000\times (0.9475)^6\\\\ =265,000\times 0.72356\\\\ =191743.7363$

Difference in payments  from year 5 to year 6 = $ 202368.059 - $ 191743.73

         =$ 10624.329 (approx)

Monthly payment  $=\frac{10624.329}{12}\\\\ = 885.360$

Option (B) 880.    ... is appropriate.