In an ARM, which statement best describes the margin?

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Multiple Choice

In an ARM, which statement best describes the margin?

Explanation:
In an ARM, the interest rate is the sum of two parts: the index and the margin. The margin is the lender’s fixed markup over the index, set at loan origination and remainingunchanging for the life of the loan. The index moves with market conditions, so it’s the part that causes rates to adjust over time. The other statements describe the index (the variable portion), a taxes-related component, or the notion of an unchanging initial rate, none of which define the margin. So the margin is the lender’s fixed markup added to the index to determine the rate.

In an ARM, the interest rate is the sum of two parts: the index and the margin. The margin is the lender’s fixed markup over the index, set at loan origination and remainingunchanging for the life of the loan. The index moves with market conditions, so it’s the part that causes rates to adjust over time. The other statements describe the index (the variable portion), a taxes-related component, or the notion of an unchanging initial rate, none of which define the margin. So the margin is the lender’s fixed markup added to the index to determine the rate.

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