Lender's can partially avoid estimating interest rates by tying an ARM to an interest rate index.

Name: Lender's can partially avoid estimating interest rates by tying an ARM to an interest rate index.
Brand: Quizplus
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Question

Quizplus · Accepted Answer

By tying an ARM (Adjustable Rate Mortgage) to an interest rate index, the lender can adjust the interest rate based on the fluctuations of the index, rather than estimating the rate themselves. This can reduce risk for the lender and potentially benefit the borrower if the index rate is favorable.

Lender's Can Partially Avoid Estimating Interest Rates by Tying an ARM