An adjustable rate mortgage with a baseline rate of 4%,a margin of 1%,and an annual cap of 1% would have a mortgage rate no higher than 6% in the second year.

Question

Quizplus · Accepted Answer

The baseline rate is 4% and the margin is 1%, so the initial mortgage rate would be 5%. 
If the annual cap is 1%, then the highest the mortgage rate can increase in one year is 1%, bringing it to a maximum of 6% in the second year. Therefore, the statement is true.

An Adjustable Rate Mortgage with a Baseline Rate of 4%,a