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An interest only ARM is made for $180,000 for 30 years. The start rate is 7 percent, with a floor on interest rate of 6%, and the borrower will (1) make monthly interest only payments for 3 years. Payments thereafter must be sufficient to fully amortize the loan at maturity. (2/. )

a. What will the payments be for the first 3 years?

b. Assume that at the end of year 3, the reset rate is 5 percent. What will payments be?

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