FinanceIntermediateDelaware Exam
An adjustable-rate mortgage (ARM) with a 2/6 cap means:
AThe rate can adjust 2% per year and 6% total over the loan life
BThe initial rate is fixed for 2 years, then adjusts with a 6-month cap
CThe rate can adjust 2% per adjustment period and 6% total lifetimeCorrect
DThe rate adjusts every 2 years with a maximum of 6% adjustment per period
Why The rate can adjust 2% per adjustment period and 6% total lifetime Is Correct
Answer C: The rate can adjust 2% per adjustment period and 6% total lifetime
A 2/6 cap structure on an ARM means the interest rate can increase no more than 2% per adjustment period and no more than 6% above the initial rate over the life of the loan.
Exam Tip: Finance
Finance questions often involve calculations. Master the T-bar method, understand the difference between conventional and government-backed loans, and know key ratios like LTV and DTI.
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