Adjustable-rate mortgages ____ of rising interest rates on a typical savings institution's spread. They ____ of declining interest rates on the spread.
A)reduce the adverse impact; reduce the favorable impact
B)reduce the adverse impact; increase the favorable impact
C)increase the adverse impact; increase the favorable impact
D)increase the adverse impact; reduce the favorable impact

Question

Quizplus · Accepted Answer

Adjustable-rate mortgages (ARMs) help savings institutions by aligning the interest rates on their assets with market rates, thus reducing the adverse impact of rising rates. However, they also reduce the favorable impact of declining rates, as the rates on ARMs would decrease, lowering the spread.

Adjustable-Rate Mortgages ____ of Rising Interest Rates on a Typical