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Is 'whose' in option C not referring to 'budgets' ?
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gmatFalcon
Even though variable rate mortgages are an attractive option due to low introductory interest rates, it can be potentially dangerous for people with tight budgets, whose monthly expenditures should remain fairly constant to avoid ending up in debt.

A.it can be potentially dangerous for people with tight budgets, whose
B. they can be potentially dangerous for people with tight budgets, because their
C. they are potentially dangerous for people with tight budgets, whose
D. for people with tight budgets it can be dangerous, because their
E. for people with tight budgets, they can be potentially dangerous in that their

Good question
Answer is C
A it in is wrong as it refers to a plural noun "variable rate mortgages"
B their is ambiguous as it can refer to both "variable rate mortgages " and people.
C Correct as whose is used to refer to people .
D it is wrong
E their is wrong
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In choice (B), isn't "can be potentially" redundant?
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Yes, the redundant "can potentially" is a problem in A, B, and E.
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A.it can be potentially dangerous for people with tight budgets, whose - "Variable interest rates" is plural we cant use "it" - Eliminate A
B. they can be potentially dangerous for people with tight budgets, because their - "can be potentially" is redundant. Use either can be or potentially not both - Eliminate B
C. they are potentially dangerous for people with tight budgets, whose - Keep C - Best available choice
D. for people with tight budgets it can be dangerous, because their - same as A - Eliminate B
E. for people with tight budgets, they can be potentially dangerous in that their - pronoun ambiguity with "they" as it can refer to "budgets" or "Variable interest rates" - Eliminate E

Looking forward to receiving your feedback on my explanation.
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Is 'whose' in option C not referring to 'budgets' ?

No, it is referring to "people"
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SUPCFAFRM

We generally apply noun modifiers to the adjoining noun, but this is not an absolute noun. Specifically, when we add our modifier to a noun phrase that ends in a modifier, we may apply the second modifier to the whole noun phrase that came before. In other words, "whose" refers to "people with tight budgets."

We can be fairly confident that this reading is correct, since the other interpretation ("budgets have monthly expenditures") doesn't make much sense.
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