Answer:
The initial payment will be $579.17
Step-by-step explanation:
Cecil has obtained a $139,000, 5/1 30-year ARM at 5%.
During the first 3 years, he has an option of paying interest only. So, it is simple interest.
Simple interest is given as :
[tex]\frac{p\times r\times t}{100}[/tex]
here, p = 139000
r = 5%
t = 30
Putting values in formula:
[tex]\frac{139000\times5\times30}{100}[/tex] = $208500
As this is interest for 30 years or 360 months. So, for initial interest we will divide the interest with 360.
[tex]\frac{208500}{360}=579.166[/tex] ≈ $579.17
Therefore, the initial payment will be $579.17
