FIN 364 DeVry Week 7 Homework
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FIN 364 DeVry Week 7 Homework
FIN364
FIN 364 DeVry Week 7 Homework
FIN 364 DeVry Week 7 Homework
- Question : (TCO 8)A contract designed to use the equity in a home for retirement income without any required payments is called a(n) _____.
- rollover mortgage
- reverse annuity mortgage
- adjustable-rate mortgage
- home equity loan
Question 2. Question : (TCO 8) State and local governments make mortgage loans at below-market rates of interest because
- they want to compete with the thrifts.
- they want to help local thrift institutions.
- they can obtain funds for mortgage financing cheaply by selling tax-exempt securities.
- they lend to lower income, larger home buyers.
Question 3. Question : (TCO 8) Which of the following is not a reasonable expectation for investors in pass-through mortgage securities?
- The securities are readily marketable.
- They have little default risk.
- The investor receives cash flows in proportion to his/her ownership proportion.
- The timing of the cash flow return from the securities is quite predictable.
Question 4. Question : (TCO 8) Which of the following is not used to adjust ARM rates?
- Treasury security rates
- Dow Jones Mortgage Rate Index
- S & L cost of funds index
- LIBOR
Question 5. Question : (TCO 8) Which of the following is not a mortgage-backed security?
- A jumbo mortgage
- A Ginnie Mae pass-through
- A collateralized mortgage obligation
- A real estate mortgage investment conduit (REMIC)
Question 6. Question : (TCO 8) If you were a manager of a thrift institution and you expected interest rates to increase, what type of mortgage would you most like to hold?
- Balloon payment, 10 years
- Rollover mortgage, two years
- Adjustable-rate mortgage, monthly
- Fixed-rate mortgage, 15 years
Question 7. Question : (TCO 8) Which of the following is not associated with tightened mortgage credit standards?
- More time on the current job required.
- An increase in the loan/value ratio.
- A decrease in the maximum total debt payments per month per amount of monthly income.
- Decreased maximums in the payment/income ratio of borrowers.
Question 8. Question : (TCO 8) Which of the following is not true about construction-to-permanent mortgages?
- Bridge financing is provided by lender over the time frame required by the borrower to purchase land and construct the house.
- Both interest and principal payments are made until construction is completed.
- Loan is financed in increments as construction payments have to be made.
- On completion of the construction, loan balance is rolled over into the type of mortgage contract desired by borrower.
Question 9. Question : (TCO 8) Mortgage bankers usually do not
- permanently fund mortgages.
- originate mortgages.
- service mortgages.
- collect monthly payments from borrowers.
Question 10. Question : (TCO 8) The Tax Reform Act of 1986 increased the popularity of home equity lines of credit because
- tax deductibility of interest for homeowners was reduced.
- interest incurred under home equity lines was made tax deductible, but interest on other household financing was not.
- banks and savings and loans were given tax incentives to make home equity lines of credit.
- the law reduced the rates charged on home equity loans.
Question 11. Question : (TCO 8) Which of the following statements is true?
- All fixed-rate mortgages have interest rate caps.
- All adjustable rate mortgages have interest rate caps.
- An interest rate cap on a mortgage reduces the lender’s interest rate risk exposure.
- Usually, an annual interest rate cap on a mortgage is 5%, and a lifetime cap is 1-2%.
Question 12. Question : (TCO 8) The original purpose of the Federal Home Loan Mortgage Corporation (Freddie Mac) was to
- make home loans to low income individuals.
- purchase the conventional mortgages from thrift institutions.
- purchase the insured conventional mortgages from financial institutions.
- purchase the government insured mortgages from thrift institutions.
Question 13. Question : (TCO 8) What is the monthly payment on a $200,000 conventional fixed-rate mortgage, 9 percent, financed for 15 years?
- $2,028
- $1,500
- $1,389
- $2,067
Question 14. Question : (TCO 8) For a $200,000 conventional fixed-rate mortgage, 7 percent, financed for 15 years, what is the loan balance after 10 years if paid as agreed?
- $92,721
- $83,581
- $85,492
- $90,785
Question 15. Question : (TCO 8) What is the monthly payment on a home costing $150,000, 30 percent down, 25 years at 9 percent?
- $636.09
- $881.16
- $763.31
- $677.82