You have decided to buy a $250,000 house. The bank will finance 80% of the price. You take a 10-year 2/1 adjustable rate mortgage (ARM), which carries a 3.8% fixed rate for the first 2years, and...

You have decided to buy a $250,000 house.  The bank will finance 80% of the price.

You take a 10-year 2/1 adjustable rate mortgage (ARM), which carries a 3.8% fixed rate for the first 2years, and 1-year LIBOR + 2 % afterwards.

Question: How much are the payments after 2 years if the LIBOR is 3%?