You have an option on an ARM that has a two-year adjustment interval, 4% margin, 2% periodic rate cap and a 6% lifetime cap. The current initial rate is 5.35%. You can also get a 30-year, fixed-rate mortgage for 6.65%
You plan on staying in this home for at least 10 years. What would be your best choice?
A) Probably the ARM loan since your PITI would be lower.
B) Probably the ARM loan since your PITI would be lower and the market rates of interest could get lower.
C) Probably the fixed-rate loan because your PITI will be lower.
D) Probably the fixed-rate loan because it is easier to budget for and it is less risky for you.
Answer: D
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You have an average outstanding balance on your credit card of $1,000. Which of the following would be your best choice for minimizing the cost of credit?
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