The Purpose of a Rate Cap with an Adjustable Rate

question 7

Multiple Choice

The purpose of a rate cap with an adjustable rate mortgage is to:

• A) minimize interest costs.
• B) prevent changes in the amount of the monthly payment.
• C) increase negative amortization.
• D) restrict the amount by which the interest rate can increase.
• E) lower the escrow account.

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Definitions:

Adulthood

is a phase of human development that follows adolescence and is characterized by full physical development, maturity, and the assumption of adult roles and responsibilities.

Nomothetic Approach

A research approach that aims to discover general laws and principles by studying large groups of people and emphasizing statistical averages.

Personality

The mix of traits and qualities that create a person’s unique personality.

Parsimonious

Describes explanations or theories that are simple and based on the fewest necessary assumptions, often preferred in scientific research for their efficiency and elegance.