Financial Planner

Category - General Principles of Financial Planning

What type of product has interest rates associated with benchmarks determined by Treasury Bills or prime-rates?
  1. Conventional Mortgage
  2. Adjustable Rate Mortgage
  3. Ratio Mortgage
  4. Unsecured debt
Explanation
Answer: B - Adjustable rate mortgages are a product that has interest rates associated with benchmarks determined by Treasury Bills or prime-rates. Additionally, an additional spread or ARM margin is added to the benchmark rate. The initial interest rate is usually lower than conventional loans and fixed for a short period of time. After the agreed to fixed-period, an ARM can adjust as often as monthly.
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