If you decide to buy a house with an adjustable-rate mortgage (ARM), you are:
A) exposing yourself to inflation risk.
B) reducing your inflation risk.
C) passing inflation risk to the lender.
D) taking on some of the lender's inflation risk.
E) increasing your mortgage payment.

Question

Quizplus · Accepted Answer

With an adjustable-rate mortgage, your interest rate and thus your mortgage payment can increase if inflation increases. Therefore, you are exposing yourself to inflation risk.

If You Decide to Buy a House with an Adjustable-Rate