medium · Asset-Backed Securities asset-nuances
A 2/28 hybrid ARM in a subprime RMBS pool has a 2-year teaser rate of 8.00%. At the reset date, the rate becomes 6-month LIBOR + 6.00%, subject to a 12.00% lifetime cap.
If 6-month LIBOR is 7.50% at the time of reset, what is the new interest rate for the borrower?
- 12.00%
- 13.50%
- 14.00%
- 8.00%
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