If One of the Terms of an ARM Read,interest Is

question 18

Multiple Choice

If one of the terms of an ARM read,interest is capped at 2%/5%,what would that mean?

• A)The borrower can choose the cap he wants by simply circling the appropriate choice
• B)The interest rate has a 2% annual cap rate and a 5% lifetime cap rate
• C)The interest rate has a 5% annual cap rate and a 2% lifetime cap rate
• D)The interest rate has a 2% annual cap rate and a 5% floor cap rate

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Definitions:

Selling Price

The amount of money charged for a product or service, or the sum the consumer believes it is worth.

Absorption Costing

A pricing methodology that sums up all production-related costs, from raw materials and labor to both flexible and fixed overheads, in calculating the expense of a product.

Cost-plus Pricing

A pricing approach that sets the selling price by adding a predetermined markup to the cost per unit of a product.

Return on Investment

A measure of the profitability and efficiency of an investment, calculated as net profit divided by the cost of the investment.