If an ARM Index Increased 15%,the Negative Amortization on a Loan

Multiple Choice

If an ARM index increased 15%,the negative amortization on a loan with a 5% annual payment cap is calculated by:

A) Using the same payment as last year and deducting 5% from the principal balance
B) Increasing the payment by 5%
C) Totaling the difference between the payments with the 5% capped payment
D) Compounding the difference between the payments as if no cap existed and with the 5% capped payment