1) Which of the following is not true for a 5/1 Adjustable Rate Mortgage (ARM).
A) is a mortgage in which the rate is adjustable for 5 years
B) in the sixth year, the loan becomes an ARM
C) the new rate is determined by an economic index
D) a predetermined margin is usually between 2.25-3.0%
E) An adjustment interval is the period between potential rate changes
2) In A(n) _____ arrangement, the borrower may end up making payment to cover not only the loan amortization, but also interest on deferred interest from an earlier period.
A)) Graduated payment mortgage
B) shared appreciation mortgage
C) adjustable rate mortgage
D) more than one of the above (which ones)
3) Equity participation:
A) is popular in commercial real estate
B) lets the lender provide borrowed capital
C) lets the lender provide part of the equity or ownership
funds
D) more than one of the above
4) Which of the following is a disadvantage of a regular partnership investment arrangement?
A) It is the simplest legal arrangement
B) There is a well-defined center of responsibility
C) The liability of each investor is not limited to his or her
investment
D) All of the above are advantages
5) Which of the following is NOT a characteristic of real estate investment trusts?
A) Similar to mutual funds, they pool investor funds and invest directly in real estate or make construction or mortgage loans.
B) They provide a tax shelter to wealthy investors
C) It is the most liquid type of real estate investment
D) All of the above are characteristics of REITS
1) Which of the following is not true for a 5/1 Adjustable Rate Mortgage (ARM). A)...
With a fixed-rate mortgage (FRM), the ___________ bears the interest rate risk and with an Adjustable Rate Mortgage (ARM) the __________ bears the interest rate risk. A. borrower; lender B. lender; lender C. borrower; borrower D. lender; borrower
Assume that a lender offers a 30-year, $150,000 adjustable rate mortgage (ARM) with the following terms: Initial interest rate 7.5 percent Index one-year Treasuries Payments reset each year Margin 2 percent Interest rate cap 1 percent annually; 3 percent lifetime Discount points 2 percent Fully amortizing; however, negative amortization allowed if interest rate caps reached Based on estimated forward rates, the index to which the ARM is tied is forecasted as follows: Beginning of year (BOY) 2=7 percent; (BOY) 3=8.5...
Jennifer has just borrowed $100,000 to buy a home on a 30-year, adjustable rate mortgage(ARM). The benchmark index is LIBOR which is currently at 2.5%. Her margin is 2% and the loan has caps of 1% annually, and 5% lifetime. While her initial rate should be 4.5%, the lender has granted her a "teaser" rate of 4% for the first year. Assuming that the periodic cap applies to any initial rate, including the teaser rate, if LIBOR rises 1 1/2%...
All else being equal, with an Fixed Rate Mortgage (FRM) compared to an Adjustable Rate Mortgage (ARM), there is __________ default risk and ___________ prepayment risk. A. equal; equal B. less; less C. greater; less D. less; greater
Molly Swift has been analyzing different adjustable rate mortgage (ARM) alternatives for the purchase anew home. She anticipates owning the home for six years. The lender offers Ms. Swift a $150,000, 30 year ARM with the following terms: Initial interest rate 7.5 percent Index 1 year Treasuries Payments adjusted each year Margin-3 percent Interest rate cap-2 % annually/6 % lifetime Payment cap - none Negative amortization- No Discount points-2 percent Based on estimated forward rates computed from the yield curve...
Consider a 30-year adjustable rate mortgage (ARM), which requires the borrower to make monthly payments at the end of each month. The mortgage amount is $432,000 and the APR on the mortgage is 3.65% for the first 10 years and then 3.87% for the next 20 years. Prepare a loan amortization schedule for this mortgage. Assume that the mortgage closing date is October 1, 2018. Among other things, the following columns should be included. (50) (i) Date (ii) Beginning Balance...
Question 16 Which of the following adjustable rate mortgage (ARM) options can potentially lead to negative amortization? Minimum payment option None is the correct answer Interest only option 30-year fully amortizing option 15-year fully amortizing option
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A bank offers both adjustable and fixed rate mortgage loans on residential properties, which are classified into three categories: single-family homes, condominiums, and multi-family homes. Each loan made in 2010 was classified according to type of mortgage and type of property, as shown in the given table. Single Family Condo Multi Family Adjustable 1500 788 337 Fixed Rate 375 377 373 Answer the following: (Express answers as fractions or to 4 decimal places) a) What is the probability that a...