Finance
What is an interest rate cap on an adjustable-rate mortgage?
AA maximum loan amount
BA limit on how much the interest rate can increase per adjustment period and over the life of the loan✓ Correct
CThe initial fixed rate period
DThe maximum monthly payment
Explanation
ARM interest rate caps limit how much the rate can increase: periodic caps limit changes at each adjustment, and lifetime caps limit the total increase over the loan's life. For example, a 2/2/5 cap: 2% at first adjustment, 2% subsequently, 5% lifetime.
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