In Order to Calculate the APR for an ARM,you Must

question 16

Multiple Choice

In order to calculate the APR for an ARM,you must,

• A) only use the first year's given interest rate.
• B) estimate interest rates over the life of the loan.
• C) assume the worst case scenario and use interest rates at their highest possible point over the life of the loan.
• D) use only the first five year's interest rates because they can easily be estimated and most people only own a property for five years.

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Definitions:

Interest Calculations

The process of determining the amount of interest owed or earned over a specified period of time, based on a given rate and principal amount.

Merchandise

Goods available for sale in a retail or wholesale environment.

Journalize

The act of recording transactions in an accounting journal in chronological order.

Interest Expense

The cost incurred by an entity for borrowed funds, represented as an expense on the income statement.