ARMs
A) force borrowers to assume interest rate risk.
B) became more prevalent during the Great Inflation.
C) both of the above.
D) neither of the above.

Question

Quizplus · Accepted Answer

Adjustable-rate mortgages (ARMs) indeed force borrowers to assume interest rate risk because the interest rates on these loans can fluctuate over time, affecting the amount of the monthly payments. Additionally, ARMs became more prevalent during periods of high inflation, such as the Great Inflation of the 1970s and early 1980s, as they allowed lenders to adjust interest rates in response to rising inflation, making them more attractive or feasible compared to fixed-rate mortgages.