Finance
Which of the following best describes a 'teaser rate' on an ARM?
AThe rate that applies after the first adjustment period
BA below-market introductory rate that attracts borrowers but adjusts upward later✓ Correct
CA rate reserved for jumbo loans
DThe rate applied after a negative amortization period
Explanation
A teaser rate is an artificially low introductory interest rate on an ARM. After the introductory period, the rate adjusts to the market rate based on the index plus margin, potentially causing significant payment increases.
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