8. A borrower has secured a 30-year, $450,000 fixed rate loan at 4.25% with monthly payments....

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8. A borrower has secured a 30-year, $450,000 fixed rate loan at 4.25% with monthly payments. Five years later, an investor w

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Answer 1

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Answer: C. The market value of the loan is lower than the book value of the loan because the market rate of interest is higher than the interest rate on the loan.

If market rate of interest equals stated rate, market value of loan equals book value.

If market rate of interest is less than stated rate, market value of loan exceeds its book value.

If market rate of interest exceeds the stated rate, market value of the loan is lower than its book value.

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Answer 2

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8. A borrower has secured a 30-year, $450,000 fixed rate loan at 4.25% with monthly payments....

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