Finance
An adjustable-rate mortgage (ARM) includes a 'cap' feature. What does this cap limit?
AThe total amount the borrower can borrow
BHow much the interest rate can increase per adjustment period and over the life of the loan✓ Correct
CThe maximum property value that can be financed
DThe lender's profit margin on the loan
Explanation
ARM caps limit how much the interest rate can increase: the periodic cap limits changes per adjustment, the lifetime cap limits total increase over the loan term. This protects borrowers from unlimited rate increases.
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