Finance
A Connecticut homeowner's adjustable-rate mortgage resets and the new rate increases their monthly payment significantly. This is an example of what type of risk for the borrower?
ACredit risk
BInterest rate risk✓ Correct
CLiquidity risk
DTitle risk
Explanation
Interest rate risk is the risk that rising interest rates will increase the borrower's payment burden on an adjustable-rate mortgage. Borrowers with ARMs are exposed to interest rate risk, unlike those with fixed-rate mortgages who are insulated from rate increases.
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