Q3. you expect to live in a house you are planning to own for 5 years, with a $300k loan. you could get a 3/1 arm amortized over 15 years at 3.9 %. suppose the expected interest rate of the arm for years 4 and 5 is 4.5% and 5.5% respectively. marr is 10% per year compounded monthly. what is your present cost (pc) of this loan option?
using the data from q3, what is the outstanding balance of the loan at the end of 5 years?