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:

Managerial Decisions

Choices or judgments made by managers that influence the direction, operations, and effectiveness of an organization.

Union Formation

The process by which workers organize themselves into a collective group to negotiate with employers on wages, working conditions, and other employment terms.

Unionized Facilities

Workplaces where a labor union represents the interests of employees in negotiations with management.

Representation Elections

Voting processes held to determine whether employees want to be represented by a union in their workplace.