Finance
A Virginia borrower takes an adjustable-rate mortgage (ARM) with a 2/2/6 cap structure. The initial rate is 4%. What is the maximum rate the ARM can reach over its lifetime?
A6%
B8%
C10%✓ Correct
D12%
Explanation
In a 2/2/6 ARM: the first cap limits the first adjustment to 2%, the periodic cap limits each subsequent adjustment to 2%, and the lifetime cap limits total increases to 6%. Maximum rate = 4% + 6% = 10%.
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