Finance
An 'interest rate cap' on an adjustable rate mortgage (ARM) limits:
AA. The maximum down payment required
BB. How much the interest rate can increase per adjustment period and/or over the life of the loan✓ Correct
CC. The maximum loan amount
DD. The number of times the rate can be adjusted
Explanation
ARM caps limit rate increases. A periodic cap limits the rate change at each adjustment; a lifetime cap limits the total increase over the loan term. For example, a 2/2/5 cap means: max 2% increase at first adjustment, 2% per subsequent period, 5% total lifetime cap.
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