Hybrid ARMs Protect Both Lender and Borrower from Interest Rate

question 86

Multiple Choice

Hybrid ARMs protect both lender and borrower from interest rate risk because

• A) the mortgage payment stays fixed for a time before it begins to vary with interest rates.
• B) hybrid ARMs guarantee the lender a fixed return and borrowers a fixed payment for the life of the contract.
• C) rates and house payments will vary quite frequently.
• D) these mortgages are insured by the FHA.

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Definitions:

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Assets that can be traded, including stocks, bonds, derivatives, and currencies.

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The federal government of the United States, a constitutional republic comprising the Executive, Legislative, and Judicial branches.

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An indexing method where the weight of each constituent security in an index or portfolio is based on its total market capitalization, favoring larger companies.