BUSI 422 Read & Interact Brueggeman & Fisher Chapter 4 solutions complete answers

BUSI 422 Read & Interact Brueggeman & Fisher Chapter 4 solutions complete answers

 

inflation measures the change in ______ power

 

A borrower with a lower credit score will have a ______ default risk than a borrower with a higher credit score.

 

Pricing a loan refers to which of the following items?

 

If anticipated inflation was 2% but actual inflation was 5%, then unanticipated inflation was _______ %.

 

The larger the default risk, the ______ the return required.

 

Unanticipated inflation adds ______ to the lender.

 

Suppose you are offered a loan with a nominal rate of 10%, compounded monthly. What is the equivalent annual rate?

 

If the anticipated inflation increases, the premium required for inflation will ______.

 

The accrual rate for a mortgage with monthly payments will be ______.

 

An annual rate of 8.30% compounded annually is equivalent to a ______% annual rate compounded monthly.

 

True or false: The accrual rate and pay rate cannot be the same.

 

Over time, the amount of principal repaid for a fully amortizing, constant payment mortgage will (increase/decrease)?

 

Which of the following goals may be achieved by a partially amortizing loan?

 

Over time, the amount of interest paid per payment for a fully amortizing, constant payment mortgage will (increase/decrease)?

 

A ______ amortizing constant payment loan will have a ________ payment at maturity.

 

With a negatively amortizing loan, the payment is _____ the payment with a positively amortizing loan

 

If the initial loan amount is $90,000 and the loan is negative amortizing, what must the amount due at maturity be?

 

True or false: A negative amortizing loan exists if both the borrower and lender agree that the loan balance will increase at maturity.

 

Rank the loan type by its ending loan balance (largest to smallest), all else equal.

 

Which of the following loans have an increasing loan balance over time?

 

Given a 30-year loan of $150,000 with an interest rate 4% per year making monthly payments, what is the loan balance after 10 years?

 

What is the amount received to the borrower if they were to borrow $100,000 for 30 years at an interest rate of 7% with a loan discount charge of 2 points?

 

True or false: Loan origination fees and loan discount fees are the same thing.

 

What is the amount received to the borrower if they were to borrow $120,000 for 30 years at an interest rate of 7% with a loan discount charge of 3 points?

 

True or false: Loan originators can make adjustments to their yield by charging loan fees.

 

The pricing of the interest rate is affected by the supply and demand of loanable funds and

 

Determining the market rate of interest comes down to the ______ of loanable funds and ______ of borrowers.

 

The mortgage market is part of a larger capital market, including?

 

If you invest in a mortgage that pays 12% and inflation was 4%, what was the real rate of return on the mortgage?

 

A borrower with a lower credit score will have a ______ default risk than a borrower with a higher credit score.

 

True or false: The interest rate that a bank will charge is affected by the time period.

 

One determinant of interest rates in the mortgage market is the (blank) costs associated with a lenders money.

 

The lender sets the rate of interest on a mortgage using which of the following equations, where p is a default risk premium, f is a premium reflecting unanticipated inflation, and r is a real rate of interest.

 

If anticipated inflation was 2% but actual inflation was 5%, then unanticipated inflation was

 

The accrual rate for a mortgage with annual payments will be ______.

 

The ratio of payments to the loan amount is the    .

 

Match the type of CPM loan with its pay rate:

 

Which of the following loan payment patterns is widely used to finance single family residences?

 

For a fully amortizing, constant payment mortgage, the balance at the end of the loan life will be:

 

Match the type of CPM loan with the loan balance at maturity:

 

A partially amortizing constant payment loan will have a (blank) payment at maturity.

 

A constant payment mortgage is used _______.

 

With a negatively amortizing loan, the payment is _____ the payment with a positively amortizing loan

 

If the initial loan amount is $100,000 and the loan is negative amortizing, what must the amount due at maturity be?

 

Over time, the amount of principal repaid for a fully amortizing, constant payment mortgage will ----- (increase/decrease)?

 

Given a 30-year loan of $150,000 with an interest rate 4% per year making monthly payments, what is the loan balance after 10 years?

 

Loan fees are an example of _______.

 

Which of the following are examples of loan fees?

 

What is the amount received to the borrower if they were to borrow $120,000 for 30 years at an interest rate of 7% with a loan discount charge of 3 points?

 

To find the loan balance at any point in time, one should calculate which of the following at that point in time?

 

Closing costs represent additional costs that the (blank) must pay at origination.

 

True or false: A potential reason for loan discounting fees is due to lenders prepackaging a group of loans to investors at a specified interest rate.

 

Given a 30-year loan of $90,000 with an interest rate of 4%, what is the actual interest of the loan if the loan fee is 3%?

 

Early repayment coupled with loan fees will   the actual interest rate.

Early repayment coupled with loan fees will ______ the actual interest rate.

 

What is the amount received by the borrower if they were to borrow $100,000 for 30 years at an interest rate of 7% with a loan discount charge of 2 points?

 

Competition amongst _______ is a potential explanation for loan discounting fees.

 

Why would loan originators alter the yield using fees?

 

Given a 30-year loan of $100,000 with an interest rate of 4%, what is the actual interest of the loan if the loan fee is 4%?

 

If a 30 year loan is called after 10 years, its monthly payments will be _______ a 10 year loan.

 

A prepayment penalty will ______ the actual yield if the loan is paid early.

 

If a 30 year loan is called after 10 years, the monthly payments will have been (blank) (higher/lower) than a 10 year loan.

 

What is the annual interest rate of a fully amortizing, 20-year fixed rate $175,000 mortgage, with a monthly payment of $1,266.41?