Answer :
The scheduled monthly payment for the first three years of a 3/1 ARM loan with a borrowed amount of $250,000, a current annual COFI rate of 2%, and a margin of 2.5% can be calculated using the formula: (Loan Amount * (COFI + Margin)) / (12 * (1 - (1 + COFI + Margin)^(-n))).
The scheduled monthly payment for the first three years of a 3/1 ARM loan can be calculated using the formula mentioned above. Let's break down the formula step by step. First, we need to calculate the total interest rate for the loan. This is done by adding the COFI rate (2%) and the margin (2.5%). In this case, the total interest rate would be 4.5% (2% + 2.5%).
Next, we need to calculate the exponent term in the formula, which is (1 + COFI + Margin)^(-n). In this case, n is equal to 3 because we are calculating the scheduled monthly payment for the first three years. So the exponent term would be (1 + 4.5%)^(-3). Now, we can plug in the values into the formula: Payment = (Loan Amount * (COFI + Margin)) / (12 * (1 - (1 + COFI + Margin)^(-n))).
Using the given loan amount of $250,000, the COFI rate of 2%, the margin of 2.5%, and the exponent term we calculated earlier, we can calculate the scheduled monthly payment for the first three years of the loan. Keep in mind that the formula assumes the loan is being paid off over the entire term, which is typically 30 years for a 3/1 ARM.
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