What will be the new interest rate on a variable rate mortgage after adjustment if the current LIBOR is 4.5%, the current interest rate is 5.625%, and the margin is 2.75%?

To find the new interest rate on a variable rate mortgage after adjustment, you take the current LIBOR and add the margin. In this scenario, the current LIBOR is 4.5%, and the margin is 2.75%.

The calculation for the new interest rate would be:

4.5% (LIBOR) + 2.75% (margin) = 7.25%.

This addition gives us the new interest rate of 7.25% after the adjustment period. This is an important concept in variable rate mortgages, as the interest rate can fluctuate based on changes in the index rate (in this case, LIBOR) plus a fixed margin that reflects the lender's added risk and profit demand.

The other options do not reflect the correct calculation of the LIBOR plus the margin, making them irrelevant to the accurate determination of the new interest rate. Thus, the correct answer, which is 7.25%, reflects the proper application of the formula for adjusting a variable rate mortgage interest rate.