medium · Asset-Backed Securities asset-nuances
A hybrid ARM loan in a subprime mortgage pool has a 2-year fixed period at 8.5% and then resets to SOFR + 600 bp. At the reset date, SOFR is 5.0%.
If the loan has a 'periodic cap' of 200 bp per reset, what is the new interest rate for the borrower?
- 7.0%
- 13.5%
- 10.5%
- 11.0%
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