10 Questions
What does the first number in '2/6 Caps' represent in the context of a 10/1 ARM?
Initial interest rate cap
In the context of a 10/1 ARM, what does 'MTA' stand for?
Monthly Treasury Average
What is calculated to obtain the Fully Indexed Rate in the example provided?
Index + Margin
What is the Starter/Teaser Rate formula in the context of a 10/1 ARM?
Index + Margin - Discount
In the formula for calculating Maximum 11th Year Rate, what is added to the Starter Rate?
Annual adjustment cap
What does 'FIAR' stand for as mentioned in the text?
Fully Indexed Annual Rate
Based on the text, how is the 'New FIAR' calculated?
*New FIAR is obtained by adding Index and Margin
What does the 'Lifetime Adjustment Cap' represent in a 10/1 ARM?
*Lifetime Adjustment Cap refers to how much the interest rate can increase over the lifetime of the loan
'A.Calculate the Fully Indexed Rate: Index + Margin 1.375 2.75 Fully Indexed Rate 4.125%' - What is the Fully Indexed Rate in this calculation?
$4.125%
'Example Of A 10/1 ARM With 2/6 Caps Index 1 Year MTA : Discount: Margin: 1.375% 1.00% 2.75% - Calculate Maximum 11th Year Rate: Starter Rate +Annual Adj.Cap 3.125% 2.00% Max 1st Year Rate 5.125% (New Current*) Index 2.25%* +Margin 2.75% *New FIAR 5.00%' - What does 'Max 1st Year Rate' refer to in this calculation?
*Max 1st Year Rate represents the initial interest rate cap for the first year
Test your knowledge of interest calculations with this quiz. The questions cover topics such as simple interest, compound interest, loan amounts, interest rates, and due dates.
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