Finance
An 'interest rate cap' on an ARM mortgage limits:
AHow much equity the borrower builds
BHow much the interest rate can increase at each adjustment period and over the life of the loan✓ Correct
CThe maximum loan amount
DThe minimum payment required
Explanation
ARM interest rate caps limit how much the rate can increase per adjustment period (periodic cap) and over the life of the loan (lifetime cap), protecting borrowers from unlimited rate increases.
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