You currently have an ARM that is charging you 7% with an index rate of 4%,a margin of 3%,and a periodic annual cap of 3.0%.Assume that rates have now increased by 2% during the last seven months.What rate will your ARM be adjusted to?
A)will remain at 7% fixed rate
B)8%
C)9%
D)10%
E)11%

Question

Quizplus · Accepted Answer

The ARM rate is calculated by adding the index rate and the margin. Initially, it was 4% (index) + 3% (margin) = 7%. With a 2% increase in the index rate, the new index rate is 6%. Adding the margin of 3% gives 9%. The periodic cap of 3% allows this increase from 7% to 9%.

You Currently Have an ARM That Is Charging You 7