A cap in an ARM refers to:

A. The lowest interest rate that a lender can charge.

B. The highest interest rate a lender can charge.

C. The effective rate of return a lender earns.

D. The maximum increase in interest rate in a particular year.

Which of the following isnottrue about a construction loan:

A. It has a higher risk for the lender since the loan is based on future construction.

B. The borrower can decide at any time to convert it to a standard mortgage.

C. It has a shorter length than a standard mortgage.

D. Borrowers have a natural incentive to speed up the construction process in order to convert the floating construction loan to a standard fixed mortgage.