3. Assume the initial rate on a 1/1 ARM is 3.50%. The loan has a margin of +275 basis points above Libor. In one year after the loan is originated, the Libor is 2.00%. What is the fully indexed rate on the loan in one year?

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4. Suppose a bank pays depositors 0.30% on their checking deposits. The same bank makes mortgages at 3.50%. What is the bank’s Net Interest Margin (NIM)?

6. Tim wants to buy an apartment that costs $1,500,000 with an 85% LTV mortgage. Tim got a 30 year, 3/1 ARM with an initial teaser rate of 4.875%. The reset margin on the loan is 300 basis points above 1 year CMT. There are no caps. Tim anticipates the index to be 2.50% at the time of the 1^{st} reset.