Finance
An Arizona adjustable-rate mortgage (ARM) with a '5/1' structure means:
AThe loan has a 5% interest rate with 1 point
BThe rate is fixed for 5 years, then adjusts annually✓ Correct
CThe rate adjusts every 5 months for 1 year
DThe loan term is 5 years with 1 year of interest-only payments
Explanation
A 5/1 ARM has a fixed interest rate for the first 5 years, then adjusts once per year for the remaining loan term based on an index plus a margin. The borrower bears the risk of rate increases after the initial period.
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