Final answer:
An ARM typically adjusts based on the market interest rates.
Step-by-step explanation:
An adjustable-rate mortgage (ARM) is a type of loan that one can use to purchase a home in which the interest rate varies with the rate of inflation. The ARM typically adjusts based on the market interest rates. This means that if the market interest rates increase, the interest rate on the ARM will also increase, and if the market interest rates decrease, the interest rate on the ARM will decrease as well.