John buys a house for $150,000 and takes out a five year adjustable rate mortgage with a beginning rate of 6%. He makes annual payments rather than monthly payments.

Interest rates go up by 1% for each of the five years of his loan (Year 1 is 6%, Year 2 is 7%, Year 3 is 8%, Year 4 is 9%, Year 5 is 10%).

Calculate the amount of John's payment over the life of his loan. Compare these findings if he would have taken out a fix rate loan for the same period at 7.5%. Which do you think is the better deal?

I think you need to do your own home work assignments. Sorry.

I think the best deal would be to buy the house outright with no interest.

As twinkiedooter said, we won't outright give you the answers to what seems to be homework. If you give it a go and then post your answers here, people will nudge you in the right direction.

Just as a pointer, have a look at this page under compound interest;
BBC - GCSE Bitesize - Maths | Number | Cumulative increase and decrease (http://www.bbc.co.uk/schools/gcsebitesize/maths/number/percentageshirev3.shtml)

Hope that at least gets you on the right path!