Advanced algebra

Guest:

Chevy and Judith are purchasing a townhouse and finance $154,200 with a 30-year 5/3 ARM at 6.45% with a 4/13 cap structure. What will their payments be at the beginning of the sixth year assuming they are charged the maximum interest rate for that year?
$907.11
$1,356.97
$969.58
$1,314.26

hi guest,

I already answered almost all of this one and then my computer threw a tantrum and I lost it.
sometimes they are worse than 2 year olds!
Anyway,
I am not familiar with some of these term, I had to look them up or guess them.
ARM stands for adjustable rate mortgage
I think that 5/3 ARM means the first 5 years are fixed and then the ratecan be adjusted every 3 years after that.
I am guessing that 4/13 means that the payments are made every 4 weeks which is 13 times a year.
The payments will stay the same unless the interest rate changes and that does not appeared to have happened.
so
this appears to be a present value of an ordinary annuity question.
A = R * a angle n at i
where
angle n at i = [ 1- ( 1 + i ) ^-n ] / i
A = $154200
n = 30*13 = 390
i = 0.0645 / 13
R = that is what we have to find.
so
angle n at i = (1-(1+0.0645/13)^-390)/(0.0645/13) = $172.3020165