All else being equal, with an Fixed Rate Mortgage (FRM) compared to an Adjustable Rate Mortgage (ARM), there is ________...
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
Homework Answers
Option B - A fixed rate mortgage will have lower default and prepayment risk than an adjustable rate mortgage, mainly because the interest rates change periodically. As a result, if the interest rate increases, borrower may not be able to make the payment. On the other hand, if the rate falls, borrower may take advantage of that to prepay the loan.
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All else being equal, with an Fixed Rate Mortgage (FRM) compared to an Adjustable Rate Mortgage (ARM), there is ________...
With a fixed-rate mortgage (FRM), the ___________ bears the interest rate risk and with an Adjustable...
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
1) Which of the following is not true for a 5/1 Adjustable Rate Mortgage (ARM). A)...
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...
Q Searc Ch 05: Assignment - Making Automobile and Housing Decisions Term Answer Description Fixed-rate mortgage...
Q Searc Ch 05: Assignment - Making Automobile and Housing Decisions Term Answer Description Fixed-rate mortgage A. This mortgage allows borrowers to make smaller-but gradually and constantly increasing-payments for the first three to five years. At the end of this period, the payments then stabilize at the higher level and are repaid over the remaining life of the loan. Interest-only mortgage B. Over the life of this mortgage, the interest rate and the monthly payment are fixed. VA loan guarantee...
A partially amortizing FRM loan with the following terms is being made: Fixed rate with 3...
A partially amortizing FRM loan with the following terms is being made: Fixed rate with 3 discount point charges, constant payments, 12% interest rate for 20 years, $100,000 mortgage amount with a balloon payment of $50,000 scheduled at the end of year 20. The borrower will prepay at the end of year 5 with one percent of prepayment penalty. What is the effective rate of interest. Show calculations using a financial calculator (i.e. I=, N=, PMT=, etc.) Hint: Answer should...
all else being equal, a company with a high operating leverage will have All else being equal, a company with a hig...
all else being equal, a company with a high operating leverage
will have
All else being equal, a company with a high operating leverage will have relatively low risk. relatively high contribution margin ratio. relatively high variable costs. relatively low fixed costs.
A bank offers both adjustable and fixed rate mortgage loans on residential properties, which are classified...
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...
the higher the interest rate is the higher the duration, all else being equal t/f?
the higher the interest rate is the higher the duration, all else being equal t/f?
All else equal, how would an increase in the tax rate affect the government purchases multiplier?...
All else equal, how would an increase in the tax rate affect the government purchases multiplier? A. It increases the multiplier only if the marginal propensity to consume if the MPC is greater than the tax rate. B. It has no effect. C. It increases the multiplier only if the marginal propensity to consume (MPC) is less than the tax rate. D. It increases the government purchases multiplier. E. It decreases the government purchases multiplier.
A fifteen-year adjustable-rate mortgage of $117,134.80 is being repaid with monthly payments of $988.45 based upon...
A fifteen-year adjustable-rate mortgage of $117,134.80 is being repaid with monthly payments of $988.45 based upon a nominal interest rate of 6% convertible monthly. Immediately after the 60th payment, the interest rate is increased to a nominal interest rate of 7.5% convertible monthly. The monthly payments remain at $988.45, and there will be an additional balloon payment at the end of the fifteen years to pay the outstanding loan balance. (a) Calculate the loan balance immediately after the 84th payment....
Five years ago you took out a 5/1 adjustable rate mortgage and the five-year fixed rate...
Five years ago you took out a 5/1 adjustable rate mortgage and the five-year fixed rate period has just expired. The loan was originally for $ 294,000with 360 payments at 4.2 % APR, compounded monthly. a. Now that you have made 60 payments, what is the remaining balance on the loan? b. If the interest rate increases by1 %, to 5.2 % APR, compounded monthly, what will be your new payments? a. Now that you have made 60 payments, what...
Q Searc Ch 05: Assignment - Making Automobile and Housing Decisions Term Answer Description Fixed-rate mortgage A. This mortgage allows borrowers to make smaller-but gradually and constantly increasing-payments for the first three to five years. At the end of this period, the payments then stabilize at the higher level and are repaid over the remaining life of the loan. Interest-only mortgage B. Over the life of this mortgage, the interest rate and the monthly payment are fixed. VA loan guarantee...
all else being equal, a company with a high operating leverage
will have
All else being equal, a company with a high operating leverage will have relatively low risk. relatively high contribution margin ratio. relatively high variable costs. relatively low fixed costs.
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