Question: An ARM has a 5/2 cap (i.e., the rate cannot increase more than 2 percent per year and more than 5 percent over the life

An ARM has a 5/2 cap (i.e., the rate cannot increase more than 2 percent per year and more than 5 percent over the life of the mortgage). What will the mortgage rate be after three years if the initial rate is 6%, and interest rates increase by 2% in each of the first three years of the contract?
  • A. 8%
  • B. 9%
  • C. 10%
  • D. 11%
  • E. 12%

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