Finance
In an adjustable-rate mortgage (ARM), the interest rate adjustment is tied to a financial:
AIndex plus a margin set by the lender✓ Correct
BIndex set solely by the U.S. Treasury
CRate determined annually by the Federal Reserve
DFixed schedule predetermined at loan origination
Explanation
ARM interest rates are calculated by adding the lender's margin to a financial index (such as SOFR or the 1-year Treasury). The sum becomes the new interest rate when the loan adjusts.
Related Arkansas Finance Questions
- A balloon mortgage is best described as a loan that:
- A borrower has a $200,000 loan at 6% annual interest. The monthly payment is $1,199.10. Of the first month's payment, how much is principal?
- A prepayment penalty on a mortgage charges the borrower for:
- USDA Rural Development loans are designed for:
- Mortgage escrow accounts are used by lenders to:
- An FHA loan requires borrowers to pay a Mortgage Insurance Premium (MIP). This insurance protects:
- A borrower's 'front-end ratio' (housing ratio) compares:
- A mortgage with a 5/1 ARM structure means the interest rate is fixed for:
Practice More Arkansas Real Estate Questions
1,500+ questions covering all exam topics. Start free — no signup required.
Take the Free Arkansas Quiz →