Which of the Following Mortgage Scenarios Will Benefit the Homeowner

question 12

Multiple Choice

Which of the following mortgage scenarios will benefit the homeowner the most?

• A) adjustable rate mortgage when interest rate increases.
• B) fixed rate mortgage when interest rates falls.
• C) fixed rate mortgage when interest rate rises.
• D) None of these options, as the banker's interest will always be protected.

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Definitions:

Sunk Costs

Costs that have already been incurred and cannot be recovered or refunded, and should not influence current or future decisions.

Variable Costs

Costs that change in proportion to the level of production or service activity.

Fixed Costs

Expenses that remain constant regardless of the amount of production, like lease payments or wages.

Marginal Costs

The cost of producing one additional unit of a product, which varies depending on the level of production.