You Have an Option on an ARM That Has a Two-Year

question 140

Multiple Choice

You have an option on an ARM that has a two-year adjustment interval,4% margin,2% periodic rate cap and a 6% lifetime cap.The current initial rate is 5.35%.You can also get a 30-year,fixed-rate mortgage for 6.65%.You plan on staying in this home for at least 10 years.What would be your best choice?

• A)Probably the ARM loan since your PITI would be lower.
• B)Probably the ARM loan since your PITI would be lower and the market rates of interest could get lower.
• C)Probably the fixed-rate loan because your PITI will be lower.
• D)Probably the fixed-rate loan because it is easier to budget for and it is less risky for you.

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Definitions:

Observational Studies

Research methods in which subjects are observed in their natural environment without any manipulation by the researcher.

Cause and Effect

The principle that every event (effect) has a cause or reasons behind it, and every cause leads to an effect.

Generalize

The act of applying specific observations to broader contexts or populations.

Naturalistic Observation

An observational study technique where participants are watched in their usual surroundings without any intervention from the researcher.