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Exam 4: Fixed Interest Rate Mortgage Loans

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Question 1

True/False

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Determining a loan balance on a CPM is a simple present value of an annuity problem.

A) True
B) False

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Question 2

Multiple Choice

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Which of the following is NOT a determinant of interest rates for single family residential mortgages?

A) The demand and supply of mortgage funds
B) Inflation expectations
C) Liquidity
D) The demand and supply of apartments

E) A) and D)
F) A) and C)

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D

Question 3

Multiple Choice

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A borrower has a 30-year mortgage loan for $200,000 with an interest rate of 6% and monthly payments.If she wants to pay off the loan after 8 years,what would be the outstanding balance on the loan?

Which of the following closing costs DO NOT increase the lender's effective loan yield?

The effective interest rate on a mortgage will always be higher than the stated rate of the loan.

Assuming all APRs equal,the effective interest rate on a loan is highest when:

The annual percentage rate closely approximates the borrower's true cost of funds.

A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5%.What would the monthly payment be?

One difference between the constant amortizing mortgage (CAM)and the constant payment mortgage (CPM)is the interest paid and loan amortization relationship.With a CAM,the loan amortization and interest paid are directly related and with the CPM the loan amortization and the interest paid are inversely related.

In comparison to the first month's payment of a CAM,the first month's payment of a CPM:

A borrower obtains a $150,000 reverse mortgage with monthly payments over 10 years.If the interest rate of the mortgage loan is 8%,what is the monthly payment received by the borrower?

Demand for a mortgage loan is considered:

Origination fees are tax deductible as an interest expense.

Borrowers with fixed rate mortgages generally benefit if actual inflation is higher than expected inflation.

APR stands for which of the following?

One of the most popular amortizing mortgages today is the constant payment mortgage.Which of the following characterizes the components of the CPM payment over the life of the loan?

Inflation makes very little difference to lenders of and investors needing money.

One of the first amortizing mortgages was the constant amortization mortgage (CAM) .Which of the following characterized the components of the CAM payment over the life of the loan?

Because its payment stream looks like a staircase,which loan is sometimes referred to as "stepped-up" financing due to prearranged payment increases?

What is the principal portion of the 222 payments of a fully amortizing $250,000,30-year fixed rate loan with an interest rate of 4.825%?