If an ARM Index Increased 15%,the Negative Amortization on a Loan

question 17

Multiple Choice

If an ARM index increased 15%,the negative amortization on a loan with a 5% annual payment cap is calculated by:

• A) using the same payment as last year and deducting 5% from the principal balance.
• B) increasing the payment by 5%.
• C) totaling the difference between the payment as if no cap existed and the 5% capped payment.
• D) compounding the difference between the payment as if no cap existed and the 5% capped payments.

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