Description
Real Estate Finance and Investments 15th Edition By Brueggeman – Test Bank
CHAPTER 4
Fixed Interest Rate Mortgage Loans
TRUE/FALSE
- Inflation makes very little difference to lenders of and investors needing money. (F)
- Lenders and investors worry about default, interest rate, marketability, and liquidity risks. (T)
- One difference between the constant amortizing mortgage (CAM) and the constant payment mortgage (CPM) is the interest paid and loan amortization relationship. With a CAM, the loan amortization and interest paid are directly related and with the CPM the loan amortization and the interest paid are inversely related. (T)
- Determining a loan balance on a CPM is a simple future value of an annuity problem. (F)
- With every CPM, the effective costs of borrowing are higher than the stated rate of the loan. (F)
- Truth-in-lending requires the borrower to tell the truth on the loan application. (F)
- The annual percentage rate, disclosed at the loan closing, closely approximates the borrower’s true cost of funds. (F)
- Prepayment penalties increase the lender’s mortgage yield and discount points decrease it. (F)
- Origination fees are tax deductible as an interest expense. (F)
- Graduated payment mortgage are loans available to people who have graduated from college. (F)
- Borrowers with fixed rate mortgages generally benefit if actual inflation is higher than expected inflation. (T)
- The APR for a loan assumes it is prepaid after ten years. (F)
- With a reverse mortgage the borrower receives payments from the bank. (T)
MULTIPLE CHOICE
- A borrower takes out a 30-year mortgage loan for $250,000 with an interest rate of 5%. What would the monthly payment be? (C)
-
- $694
- $1,042
- $1,342
- $1,355
- Not enough information
- 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 month’s payment would be applied to interest? (B)
-
- $694
- $1,042
- $1,342
- $1,355
- Not enough information
- 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)
-
- $84,886
- $91,246
- $146,667
- $175,545
- Not enough information
- 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)
-
- 5.6%
- 6.0%
- 6.4%
- 6.6%
- 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)
-
- $820
- $863
- $1,250
- $1,820
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