One way that homeowners and banks can share the risk of inflation is through
A)fixed-rate mortgages.
B)refinancing.
C)default.
D)adjustable-rate mortgages.

Question

Quizplus · Accepted Answer

Adjustable-rate mortgages (ARMs) allow the interest rate to fluctuate over time based on prevailing interest rates, thus sharing the risk of inflation between homeowners and banks. If inflation rises, the interest rate on the mortgage can increase, protecting the lender, but also potentially increasing costs for the borrower.

One Way That Homeowners and Banks Can Share the Risk