Finance
A West Virginia adjustable rate mortgage (ARM) has an initial rate of 4% for 5 years, then adjusts annually. The adjustment is tied to the SOFR index plus a 2.5% margin. If SOFR is 3% at the first adjustment, the new rate is:
A3%
B4%
C5.5%✓ Correct
D6.5%
Explanation
ARM rate = Index + Margin = 3% + 2.5% = 5.5%. Subject to rate caps specified in the loan documents. SOFR (Secured Overnight Financing Rate) has replaced LIBOR as the most common ARM index.
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