Question

moves in interest rates can result in both positives and negatives.
how does a rise in the federal rate influence adjustable - rate mortgage payments?
choose 1 answer:
a they will increase.
b they will decrease.
c it doesnt affect them.
d it doesnt affect them until refinanced.

Explanation:

Adjustable - rate mortgages (ARMs) have interest rates that are tied to an index, and the federal rate is a key factor influencing these indices. When the federal rate rises, the interest rate on ARMs typically rises as well. Since the mortgage payment for an ARM is based on the interest rate (along with the principal), an increase in the interest rate will lead to an increase in the mortgage payment. Option B is incorrect because a rise in the federal rate doesn't decrease ARM payments. Option C is incorrect as the federal rate does affect ARM payments. Option D is incorrect because ARMs are adjusted based on rate changes, not just at refinancing.

Answer:

A. They will increase.