A borrower takes out a 10-year interest only mortgage loan for $600000 with monthly payments. In the first two years the loan has an a “teaser” rate of 1%, after which the rate resets each year with 2% annual and 5% lifetime rate caps. On the first reset date, the fully indexed rate is 6%. What would be the monthly payment in the third loan year?
a. 3000
b. 2500
c. 1500
d. Because of the interest rate caps, the monthly payment would not changes.