Final answer:
Lines of credit are the loans that offer flexible borrowing and repayment options. An adjustable-rate mortgage (ARM) has a fluctuating interest rate that can change with inflation rates. If inflation falls by 3%, a homeowner with an ARM would likely see reduced mortgage payments.
Step-by-step explanation:
Loans that provide flexible borrowing and repayment options are called D) Lines of credit. Lines of credit offer a borrower the flexibility to borrow up to a certain limit and pay back the borrowed amount plus interest over time, offering a more adaptable approach to borrowing compared to fixed-rate loans, amortized loans, or installment loans.
An adjustable-rate mortgage (ARM) is a specific type of loan with an interest rate that can change, often in relation to fluctuations in the inflation rate.
With an ARM, when inflation rates rise, the interest rates on the loan may also increase. Conversely, if inflation falls, the interest rate on an ARM is likely to decrease, which could lead to lower payments for the borrower.
Therefore, if inflation falls unexpectedly by 3%, a homeowner with an adjustable-rate mortgage would likely benefit from a decrease in their interest rate, potentially leading to lower monthly mortgage payments.