Finance
What is the 'index' in an adjustable-rate mortgage (ARM)?
AThe initial fixed rate period
BA publicly reported benchmark interest rate to which the ARM's rate is tied (e.g., SOFR, prime rate)✓ Correct
CThe lender's internal rate used to set the mortgage rate
DThe rate cap on any single adjustment
Explanation
The index is a publicly reported benchmark interest rate (formerly LIBOR, now commonly SOFR or the 1-year Treasury) to which the ARM's interest rate is pegged. The rate adjusts periodically based on changes in the index plus a fixed margin.
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