Finance
An adjustable-rate mortgage (ARM) with a '5/1' structure means:
AThe rate is fixed for 1 year and adjusts every 5 years
BThe rate is fixed for 5 years and then adjusts every 1 year thereafter✓ Correct
CThe loan has a 5% cap and a 1% annual adjustment
DThe loan amortizes over 5 years with a 1-year balloon
Explanation
A 5/1 ARM has a fixed interest rate for the first 5 years, after which it adjusts annually based on an index plus margin. The '5' is the initial fixed period; the '1' is the adjustment frequency after that.
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