Finance (alternative)
A Maryland adjustable-rate mortgage (ARM) has an initial rate of 4% and annual adjustment cap of 2%. After one year, if the index rises 3%, the new rate is:
A4%
B3.3%✓ Correct
C5%
D4.5%
Explanation
The annual adjustment cap of 2% limits the rate increase to 2% even though the index rose 3%. New rate = 4% + 2% = 6%.
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