please check my answer thanks :)
Juan bought a home with an adjustable-rate mortgage. The margin on the loan is 2.7% and the rate cap is 7.2% over the life of the loan. If the current index rate is 4.3%, what isthe initial rate of the ARM ?
A. 7%
B 9.9%
C 14.32%
My answer is I said A
To determine the initial rate of the adjustable-rate mortgage (ARM), you need to calculate the sum of the margin and the current index rate.
In this case:
Margin = 2.7%
Current index rate = 4.3%
Adding these two values together, we get:
Initial rate = Margin + Current index rate = 2.7% + 4.3% = 7%
Therefore, your answer of A. 7% is correct. Well done!