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Over the life of the loan, which of the following would consistently have a Highest principal...

Over the life of the loan, which of the following would consistently have a Highest principal balance prior to maturity, given each loan had the same term, principle, and interest rate today? a. CAM b. CPM c. GPM d. Can not be determined without specific information.

Which of the following is a true statement about ARM? a. ARM is designed to help elder, house-rich and cash-poor borrowers. b. ARM is designed to solve the so-called “title effect” problem for some borrowers. c. ARM payments are subject to changing interest rate. d. ARM is less risky for the borrower because the initial interest rate is lower.

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Answer #1

A.CAM- constant amortization mortgage

CPM-constant payment mortgage

GPM -Graduated payments mortgage

The answer is C. GPM as the rate of interest goes up with the time. the monthly payment gradually grow from beginning payment amount to the final level.

B. Adjustable rate Mortgage(ARM) option C. ARM payments are subject to changing interest rate that gives lower interest rate initially.and will go up, which make monthly payment increase.

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