Finance
An adjustable-rate mortgage (ARM) in Virginia has an initial rate of 4%, a lifetime cap of 6%, and a periodic cap of 2%. If rates rise substantially after year 1, the maximum rate after year 1 would be:
A6%✓ Correct
B8%
C10%
D4%
Explanation
The periodic cap limits rate changes per adjustment period. A 2% periodic cap on a 4% initial rate means the rate can rise at most to 6% in the first adjustment.
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