UESTION 3 Adjustable-rate mortgages would be a better choice over a fixed rate mortgage when overall interest rates are trending upward. O True O False
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- How does the price level adjusted mortgage (PLAM) address the problem of uncertainty in inflationary expectations? What are some of the practical limitations in implementing a PLAM program?Compare a CMO with A, B, Z to a CMO that has the same tranches but is backed by a larger pool of mortgages (and therefore has a residual). In a CMO with a residual: Tranche A has a shorter duration and less inflation/interest rate risk Tranche 8 has a shorter duration and more inflation/interest rate risk Tranche B has a longer duration and more inflation/interest rate risk Tranche Z has more inflation/interest rate risk Tranche Z has less inflation/interest rate riskExplain the addition to the interest rate, HELOC borrowers consider the issues?
- The internal rate of return on a mortgage loan calculated from the lender's perspective is more commonly referred to as the: Multiple Choice O discount point. O effective borrowing cost. Olender's yield. Oloan constant.Which of these is NOT likely to lead to more expensive mortgages? O Higher origination loan to value ratios Uncertainty in the ability of banks to access properties through repossession More variable rate mortgages than fixed Longer mortgage duration (or "mortgage term")Explain term Buydown Loans with examples?
- Explain Incremental Borrowing Cost versus a Second Mortgage?Explain the term Fixed Interest Rate Mortgage (FRM) Loan?Borrowers should consider refinancing their existing fixed rate mortgage (FRM) loan only when the market interest rates _____; and they should refinance _____ frequently as the refinance closing costs rise. Group of answer choices increase; less increase; more decrease; less decrease; more
- How do inflationary expectations influence interest rates on mortgage loans?What is expectations theory of the term structure of interest rates? Group of answer choices a. Long term interest is equal to average short-term interest rates. b. Average rates is the term of structure of interest rates. c. Short-term interest is equal to long-term interest rates. d. Long term interest is the sum of all short-term interest rates.Compare and contrast adjustable-rate mortgages (ARMs) to Growth Equity Mortgage (GEM). What are the advantages and disadvantages of each?