Two popular forms of mortgage are the thirty-year fixed-rate mortgage, where the borrower has thirty years to repay the loan at a constant rate, and the adjustable rate mortgage (ARM), one version of which is for five years with the possibility of yearly changes in the interest rate. Since the ARM offers less certainty, its rates are usually lower than those of fixed-rate mortgages. However, such vehicles should show more variability in rates. Test this hypothesis at the 0.10 level of significance using the following samples of mortgage offerings for a loan of $160,000 (the borrower needs $200,000, but must pay $40,000 up front).
$160,000 Mortgage Rates
30-Year Fixed ARM
5.500………………………3.875
5.500………………………5.125
5.250………………………5.000
5.125………………………4.750
5.875………………………4.375
5.625
5.250
4.875