You have taken out a $350,000, 3/1 ARM. The initial rate of 6.0% (annual) is locked in for 3 years. Calculate the outstanding balance on the loan after 3 years. The interest rate after the initial lock period is 6.5%. (Note: the term on this 3/1 ARM is 30 years)
A) $2,098.43
B) $2,183.95
C) $336,294.25
D) $347,901.57

Question

Quizplus · Accepted Answer

To calculate the outstanding balance on the loan after 3 years, we need to use an amortization schedule.

Using an online calculator, we can see that the monthly payment on a 30-year loan of $350,000 with an initial interest rate of 6.0% is $2,098.43.

After 36 months (3 years), the outstanding balance on the loan would be $336,294.25.

This is the balance that will be subject to the new interest rate of 6.5%.

Therefore, the correct answer is C.

You Have Taken Out a $350,000, 3/1 ARM