What best determines whether a borrower’s investment on an adjustable rate loan goes up or down?
a fixed interest rate
a bank’s finances
a market’s condition
a person’s finances
What best determines whether a borrower’s investment on an adjustable rate loan goes up or down?
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The correct answer is a market’s condition.
An adjustable-rate loan has interest rates that fluctuate based on market conditions. Specifically, they are typically tied to an index that reflects the cost of borrowing in the market, which means as market rates increase or decrease, so will the borrower’s interest rate, affecting their investment.
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The correct answer is a market’s condition.
Adjustable rate loans have interest rates that fluctuate based on market conditions, typically tied to a specific index. When the market interest rates increase, the cost of the loan can also rise, leading to higher payments for the borrower. Conversely, if market rates decrease, the borrower’s payment may lower. So, the overall market’s condition is the key factor that influences the investment on an adjustable rate loan.
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