Finance
An adjustable-rate mortgage (ARM) is characterized by:
AA fixed interest rate for the entire loan term
BAn interest rate that changes periodically based on a market index✓ Correct
CPayments that increase by a fixed percentage each year
DA balloon payment at the end of the loan term
Explanation
An ARM has an interest rate that adjusts periodically based on a specified market index (such as SOFR or LIBOR) plus a margin. Initial rates are often lower than fixed-rate loans, but the borrower faces rate risk over time.
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