Finance
An adjustable-rate mortgage (ARM) has a rate cap structure of 2/2/6. What does the '6' represent?
AThe maximum rate increase at the first adjustment
BThe maximum rate increase at each subsequent adjustment
CThe maximum total rate increase over the life of the loan✓ Correct
DThe initial fixed-rate period in years
Explanation
ARM cap structures are expressed as initial/periodic/lifetime caps. In a 2/2/6 structure, the rate can increase 2% at first adjustment, 2% at each subsequent adjustment, and no more than 6% total over the entire life of the loan.
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