Unit 21

Question 1

What does APRC stand for?

Answer 1

Annual Percentage Rate of Charge

Question 2

What is the first step in the APRC ladder?

Answer 2

Capped

Question 3

In the Capped step, how is the rate managed?

Answer 3

The rate is capped and rises early.

Question 4

True or False: The Capped step allows for unlimited rate increases.

Answer 4

False

Question 5

What happens to the interest rate during the Capped step?

Answer 5

It rises early but is limited by a cap.

Question 6

What is the primary feature of the Variable step in APRC?

Answer 6

The interest rate can fluctuate over time.

Question 7

Fill in the blank: The Capped step is followed by the ______ step.

Answer 7

Variable

Question 8

Which step in the APRC ladder typically offers the most predictability?

Answer 8

Capped

Question 9

What happens after the Capped step in the APRC ladder?

Answer 9

The rate transitions to the Variable step.

Question 10

True or False: The Variable step guarantees a fixed interest rate.

Answer 10

False

Question 11

What is the potential risk associated with the Variable step?

Answer 11

Interest rates may increase, leading to higher payments.

Question 12

What is the purpose of capping the rate in the Capped step?

Answer 12

To protect borrowers from excessive rate increases.

Question 13

What type of borrowers may prefer the Capped step?

Answer 13

Those seeking stability in their payments.

Question 14

After the Variable step, what is the next phase in the APRC ladder?

Answer 14

The next phases may vary based on the specific product.

Question 15

True or False: The Capped step is designed for long-term stability.

Answer 15

True

Question 16

What does a ‘cap’ refer to in the context of the Capped step?

Answer 16

A limit on how high the interest rate can rise.

Question 17

Multiple Choice: Which of the following best describes the Capped step? A) Unlimited increases B) Fixed rate C) Rate limited by a cap

Answer 17

C) Rate limited by a cap

Question 18

How do borrowers benefit from the Capped step?

Answer 18

They have predictability and protection against high rates.

Question 19

What is a common concern with the Variable step?

Answer 19

Uncertainty in future payments due to rate fluctuations.

Question 20

True or False: The Capped step can lead to lower initial payments.

Answer 20

True

Question 21

What is a key characteristic of the Variable interest rate?

Answer 21

It changes based on market conditions.

Question 22

Which step in the APRC ladder is often more appealing to risk-averse borrowers?

Answer 22

Capped

Question 23

What is one potential advantage of the Variable step?

Answer 23

It may offer lower rates if market conditions improve.

Question 24

Fill in the blank: The APRC ladder consists of ______ primary steps.

Answer 24

Four

Question 25

What should borrowers consider when choosing between Capped and Variable steps?

Answer 25

Their risk tolerance and financial situation.