1. The expenses related to borrowing does not depend on:

The frequency of payment adjustments

The inclusions of caps and floors on the interest rate, payment or loan balances

The spread over the index chosen for a given ARM

none of the above

2.Which of the following would be a greater risk for an Adjustable Rate Mortgage lender?

Negative amortization is not allowed when interest is not covered by the payment due to a payment cap

There is floor for payments

Adjustment interval is longer than one year

All of the above

In regards to incremental borrowing, all of the statements are false except for:

It should be less than the rate for a first mortgage

It should be compared to the cost of obtaining a second mortgage

It is used to calculate the APR for the loan

It is independent of loan-to-value ratio