General Mortgage KnowledgeQuestion 143 of 400
An ARM is at 5.00% and the fully indexed rate at adjustment is 9.00%, but the periodic (subsequent) cap is 2%. What is the new rate?
a.9.00%
b.5.00%
c.7.00%
d.8.00%
Explanation
The periodic cap limits each adjustment to 2%: 5.00% + 2% = 7.00%, even though the fully indexed rate is 9.00%. It cannot rise to 9.00% this period and does increase above 5.00%.
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