If a borrower has a one-year ARM starting at 4.0% with a 3.0% margin and the index at year-end is 5.0%, what is the interest rate after the adjustment?

To determine the new interest rate for the one-year adjustable-rate mortgage (ARM) after the adjustment, we need to combine the specified index rate with the margin.

The adjustment occurs by adding the margin to the index rate at the end of the first year. In this instance, the margin is 3.0%, and the index rate at year-end is 5.0%.

Here's how the calculation works:

1. Combine the index rate and the margin:

• Index rate: 5.0%

• Margin: 3.0%

• Therefore, 5.0% + 3.0% = 8.0%.

After completing the calculation, the adjusted interest rate for the second year is 8.0%. However, it seems there may have been confusion in correlating the answer choices with the correct calculation.

Given the information in the question, the adjusted rate should be accurately stated as 8%. The answer provided as B (6%) does not reflect the correct calculation based on the provided figures. Hence, the correct adjusted interest rate after the adjustment would actually need further clarification as either an issue in the question or a misstatement in the expected answer choices. The proper understanding of how