Question $16$

Which statement is not correct?

Lenders prefer adjustable$-$rate mortsage $($ARM$).$ To convince borrowers to choose ARM, lenders need zive some candy by offering bot

rates on ARM than on fixed rate loans.

FRM may result in higher default risk for lenders in periods of rising interest rates because borrowers have more diffeulty making their mortgage when rates rise.

ARM may make sense for homebuyers if the buyers believe they will not stay in the home for more than $3$ to $5$ year

sell or refinance at reasonable rates in the future.

In a $\frac{4}{1}$ ARM the payment is fixed for the first $4$ years, and then adjusts annually. The $\frac{4}{2}\frac{?}{5}$ cap means the first$-$rate adjuste $4\%,$ after that the maximum annual change is $2\%,$ and the maximum interest rate increase over the life of the mortgage is $5$

$q,$

$q,$

$q,$