An adjustable-rate mortgage increases interest rate risk for the ____, but reduces interest rate risk for the ____.

Question

Quizplus · Accepted Answer

An adjustable-rate mortgage (ARM) increases interest rate risk for the borrower because their interest rate and monthly mortgage payment can fluctuate over time with changes in the market's interest rates. On the other hand, an ARM reduces interest rate risk for the originator because they transfer some of the risk to the borrower, making the loan less risky for themselves. The other options (C) and (D) are not relevant to the question.

An Adjustable-Rate Mortgage Increases Interest Rate Risk for the ____