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Business, 10.05.2021 16:10 rw050202

Which of the following two ARMs is likely to be priced higher, that is, offered with a higher initial interest rate? a. ARM A has a margin of 3 percent and is tied to a three-year index with payments adjustable every two years; payments cannot increase by more than 10 percent from the preceding period; the term is 30 years.
b. ARM B has a margin of 3 percent and is tied to a one-year index with payments to be adjusted each year; payments cannot increase by more than 10 percent from the preceding period; the term is 30 years.

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Which of the following two ARMs is likely to be priced higher, that is, offered with a higher initia...

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