Finance
What is an adjustable-rate mortgage (ARM)?
AA loan with a fixed rate for the entire term
BA loan whose interest rate changes periodically based on a market index✓ Correct
CA loan that adjusts to the borrower's income each year
DA loan that only adjusts the principal balance
Explanation
An ARM (adjustable-rate mortgage) has an interest rate that adjusts periodically based on a benchmark index (such as SOFR or Treasury rates) plus a margin. After an initial fixed period, the rate can increase or decrease, affecting the monthly payment.
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