In Comparing an Adjustable Rate Mortgage (ARM) with a Fixed

question 1

Multiple Choice

In comparing an adjustable rate mortgage (ARM) with a fixed rate mortgage (FRM) :

• A) Both the borrower and lender bear more interest rate risk with the ARM than with the FRM.
• B) Both the borrower and the lender bear less interest rate risk with the ARM than with the FRM.
• C) The ARM borrower bears more interest rate risk, but the ARM lender bears less interest rate risk, than with the FRM.
• D) The ARM borrower bears less interest rate risk, but the ARM lender bears more interest rate risk, than with the FRM.

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