Professional Documents
Culture Documents
15. A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5% and
monthly payments. What portion of the first months payment would be applied to interest?
(B)
(A) $694
(B) $1,042
(C) $1,342
(D) $1,355
(E) Not enough information
16. A borrower has a 30-year mortgage loan for $200,000 with an interest rate of 6% and
monthly payments. If she wants to pay off the loan after 8 years, what would be the
outstanding balance on the loan? (D)
(A) $84,886
(B) $91,246
(C) $146,667
(D) $175,545
(E) Not enough information
17. A borrower takes out a 30-year mortgage loan for $100,000 with an interest rate of 6% plus
4 points. What is the effective annual interest rate on the loan if the loan is carried for all 30
years? (C)
(A) 5.6%
(B) 6.0%
(C) 6.4%
(D) 6.6%
18. A borrower obtains a $150,000 reverse mortgage with monthly payments over 10 years. If
the interest rate of the mortgage loan is 8%, what is the monthly payment received by the
borrower? (A)
(A) $820
(B) $863
(C) $1,250
(D) $1,820
19. Which of the following is NOT a determinant of interest rates for single family residential
mortgages? (D)
(A) The demand and supply of mortgage funds
(B) Inflation expectations
(C) Liquidity
(D) The demand and supply of apartments
20. Risk is an important component of interest rates. Which of the following risks is NOT a
determinant of interest rates? (C)
(A) Default risks
(B) Interest rate risks
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Amortization
Decreasing
Decreasing
Constant
Constant
Payment
Decreasing
Decreasing
Decreasing
Constant
22. One of the most popular amortizing mortgages today is the constant payment mortgage.
Which of the following characterizes the components of the CPM payment over the life of
the loan? (C)
Interest
(A) Decreasing
(B) Increasing
(C) Decreasing
(D) Constant
Amortization
Decreasing
Decreasing
Increasing
Constant
Payment
Decreasing
Constant
Constant
Constant
23. In comparison to the first months payment of a CAM, the first months payment of a CPM:
(B)
(A) Is higher
(B) Is lower
(C) Is the same
(D) Cannot be determined with this information
24. At the end of five years, calculating the loan balance of a constant payment mortgage is
simply the: (C)
(A) Present value of a single amount
(B) Future value of a single amount
(C) Present value of an ordinary annuity
(D) Future value of an ordinary annuity
25. Which of the following closing costs do not increase the lenders effective loan yield? (C)
(A) Discount points
(B) Prepayment penalties
(C) Title insurance charges
(D) Origination fees
26. Which mortgage would a borrower prefer to have during inflationary and recessionary
periods? (C)
(A)
(B)
Inflationary
CPM
GPM
Recessionary
GPM
CAM
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(C)
(D)
CPM
CPM
CAM
GPM
27. Over the life of the loan, which of the following loans would continually have a lower principal
balance given each loan had the same term, principal amount, and average interest rate?
(A)
(A) CAM
(B) CPM
(C) GPM
(D) Cannot be determined with this information
28. Because its payment stream looks like a staircase, which loan is sometimes referred to as
stepped-up financing due to prearranged payment increases? (C)
(A) CAM
(B) CPM
(C) GPM
(D) ARM
29. Demand for a mortgage loan is considered: (B)
(A) Stable demand
(B) Derived demand
(C) Interest rate demand
(D) Nominal demand
30. Points are also known as: (C)
(A) Third party charges
(B) Reduction in payment amount
(C) Loan discount fees
(D) Reduction of mortgage yield
31. APR stands for which of the following? (A)
(A) Annual percentage rate
(B) Amortized percentage regulator
(C) Accrued percentage rate
(D) Annual percentage regulator
32. Assuming all APRs equal, the effective interest rate on a loan is highest when: (D)
(A) The loan has no points and a 30 year maturity and is prepaid in five years
(B) The loan has no points and is prepaid at maturity
(C) Points are charged and the loan is paid off at maturity in 30 years
(D) Points are charged and the loan has a 30 year maturity but prepaid in five years
33. Which one of the following is TRUE about Prepayment penalties: (D)
(A) They are never used with residential mortgages
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(B) They lower the effective cost if the loan is repaid before maturity
(C) They are equivalent to charging additional points for the loan
(D) They are not included in the APR calculation
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