FIN 350 Week 6 Quiz – Strayer
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Purchase A+ Graded Course Material
Quiz
5 Chapter 9 and 10
Chapter
9—Mortgage Markets
1. Mortgage-backed
securities are commonly contained within collateralized debt obligations.
a.
True
b.
False
2. Federally
insured mortgages guarantee
|
a.
|
loan repayment to the lending financial
institution.
|
|
b.
|
that the interest rate will not increase during
the life of the mortgage.
|
|
c.
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the lending financial institution a selling price
for the mortgage in the secondary market.
|
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d.
|
all of the above
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3. At
a given point in time, the interest rate offered on a new fixed-rate mortgage
is typically ____ the initial interest rate offered on a new adjustable-rate
mortgage.
|
a.
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below
|
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b.
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above
|
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c.
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equal to
|
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d.
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all of the above are very common
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4. An
institution that originates and holds a fixed-rate mortgage is adversely
affected by ____ interest rates; the borrower who was provided the mortgage is
adversely affected by ____ interest rates.
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a.
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stable; decreasing
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b.
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increasing; stable
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c.
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increasing; decreasing
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d.
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decreasing; increasing
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5. Rates
for adjustable-rate mortgages are commonly tied to the
|
a.
|
average prime rate over the previous year.
|
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b.
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Fed's discount rate over the previous year.
|
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c.
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average Treasury bill rate over the previous year.
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d.
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average Treasury bond rate over the previous year.
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6. Caps
on mortgage rate fluctuations with adjustable-rate mortgages (ARMs) are
typically
|
a.
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2 percent per year and 5 percent for the mortgage
lifetime.
|
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b.
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5 percent per year and 15 percent for the mortgage
lifetime.
|
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c.
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0 percent per year and 10 percent for the mortgage
lifetime.
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d.
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3 percent per year and 8 percent for the mortgage
lifetime.
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7. From
the perspective of the lending financial institution, interest rate risk is
|
a.
|
lower on a 30-year fixed-rate mortgage than on a
15-year fixed-rate mortgage.
|
|
b.
|
lower on a 15-year fixed-rate mortgage than on a
30-year fixed-rate mortgage.
|
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c.
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higher on a 15-year fixed-rate mortgage than on a
30-year fixed-rate mortgage.
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d.
|
higher on a 15-year adjustable-rate mortgage than
on a 30-year adjustable-rate mortgage.
|
8. Mortgage
companies specialize in
|
a.
|
purchasing mortgages originated by other financial
institutions.
|
|
b.
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investing and maintaining mortgages that they
create.
|
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c.
|
originating mortgages and selling those mortgages.
|
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d.
|
borrowing money through the creation of mortgages
that is used to invest in real estate.
|
9. For
any given interest rate, the shorter the life of the mortgage, the ____ the
monthly payment and the ____ the total payments over the life of the mortgage.
|
a.
|
greater; greater
|
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b.
|
greater; lower
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c.
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lower; greater
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d.
|
lower; lower
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10. A
financial institution has a higher degree of interest rate risk on a ____ than
a ____.
|
a.
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30-year fixed-rate mortgage; 15-year fixed-rate
mortgage
|
|
b.
|
30-year variable-rate mortgage; 30-year fixed-rate
mortgage
|
|
c.
|
15-year fixed-rate mortgage; 30-year fixed-rate
mortgage
|
|
d.
|
15-year variable-rate mortgage; 15-year fixed-rate
mortgage
|
11. A
balloon-payment mortgage requires interest payments for a 10- to 20-year
period, at the end of which the borrower must pay the full amount of the
principal.
a.
True
b.
False
12. Use
an amortization schedule. A 15-year $100,000 mortgage has a fixed mortgage rate
of 9 percent. In the first month, the total mortgage payment is $____, and
$____ of this amount represents payment of interest.
|
a.
|
1,014; 264
|
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b.
|
1,241; 750
|
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c.
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1,014; 750
|
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d.
|
none of the above
|
13. A
mortgage that requires interest payments for a three- to five-year period, then
full payment of principal, is a(n)
|
a.
|
chattel mortgage.
|
|
b.
|
balloon payment mortgage.
|
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c.
|
variable-rate mortgage.
|
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d.
|
open-ended mortgage bond.
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14. In
an amortization schedule of monthly mortgage payments
|
a.
|
the amount of interest in each payment is equal to
the principal paid.
|
|
b.
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interest payments exceed principal payments early
on.
|
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c.
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principal payments exceed interest payments early
on.
|
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d.
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B and C both occur with about equal frequency
|
15. A
mortgage with low initial payments that increase over time without ever
leveling off is a
|
a.
|
graduated payment mortgage.
|
|
b.
|
growing-equity mortgage.
|
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c.
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second mortgage.
|
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d.
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shared-appreciation mortgage.
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16. The
interest rate on a second mortgage is ____ on a first mortgage created at the
same time, because the second mortgage is ____ the existing first mortgage in
priority claim against the property in the event of default.
|
a.
|
higher than; behind
|
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b.
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equal to that; equal to
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c.
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lower than; ahead of
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d.
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higher than; ahead of
|
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e.
|
lower than; behind
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17. Which
of the following mortgages allows the home purchaser to obtain a mortgage at a
below-market interest rate throughout the life of the mortgage?
|
a.
|
second mortgage
|
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b.
|
growing-equity mortgage
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c.
|
graduated payment mortgage
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d.
|
shared-appreciation mortgage
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18. A
____ mortgage allows the borrower to initially make small payments on the
mortgage. The payments then increase over the first 5 to 10 years and then
level off.
|
a.
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graduated payment mortgage
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b.
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growing-equity mortgage
|
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c.
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second mortgage
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d.
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shared-appreciation mortgage
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19. Mortgage
companies, commercial banks and savings institutions are the primary
originators of mortgages.
a.
True
b.
False
20. ____
was created in 1968 as a corporation that is wholly owned by the federal
government. It guarantees payment on mortgages that meet specific criteria.
|
a.
|
Freddie Mac
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b.
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Ginnie Mae
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c.
|
Fannie Mae
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d.
|
None of the above
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21. "Securitization"
refers to the private insurance of conventional mortgages.
a.
True
b.
False
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