A bank advertises a 3/1 ARM at 4.65% with a 3/9 cap. . . What is the maximum interest rate that can be charged during the fifth year?. . 3%. . 4.65%. . 9%. . 10.65%
"a 3/1 ARM" means starting at a fixed interest rate for the first 3 years and the interest rate will adjust every year after the first three years up to the part where it mentions a "3/9 cap". This on the other hand tells us that the increase will be 3% each time there is an interest rate increase and the max increase is 9%. Hence the answer is 9%