Which of the Following Is Not True Concerning Adjustable-Rate Mortgages

question 63

Multiple Choice

Which of the following is not true concerning adjustable-rate mortgages (ARMs) ?

• A) There is usually a limit on how much a rate may increase per year.
• B) There is usually no limit on how much a rate may increase per year.
• C) There is usually a limit on how much a rate may increase over the life of the loan.
• D) The maximum increase over the life of the loan is usually 5%.

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Definitions:

U.S. Dollar Equivalent

The U.S. Dollar Equivalent is the amount of foreign currency expressed in terms of the value of the United States dollar, based on the current exchange rate.

Put Option

A financial instrument that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified time.

Fair Value Hedge

A risk management strategy that uses financial instruments to mitigate the risk of changes in the fair value of an asset or liability.

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The currency of Mexico, abbreviated as MXN.