BUSI 422 Read & Interact Brueggeman & Fisher Chapter 5 solutions complete answers

BUSI 422 Read & Interact Brueggeman & Fisher Chapter 5 solutions complete answers

 

The terms of an ARM are negotiated ________.

 

The maximum interest rate on an ARM loan at a beginning rate of 7% with rates capped at 2% per year and 5% overall is?

 

If an ARM has a payment cap and negative amortization, the receipt of cash flow can be _______.

 

The maximum interest rate on an ARM loan at a beginning rate of 6% with rates capped at 2% per year and 5% overall is?

 

Maximum caps will ______ the risk to borrowers of ARMS.

 

True or false: Inclusion of caps or floors on the interest rate will impact the yield of an ARM.

 

The use of an ARM _________ the risk of loss due to interest rate risk.

 

The default risk of an ARM is ______ a FRM, all else equal.

 

An interest only requires ______ to be paid monthly.

 

A loan that has a fixed rate period and then floats is called a   loan.

 

An ARM loan for 30 years at an annual interest rate of 4% and a balance of $50,000 was made. Suppose the market index rises at the end of one year and the new interest rate on the ARM is 6%. What is the new monthly payment on the outstanding loan balance for the remaining 29 years?

 

If PLAM programs were adopted extensively the adjustment interval would need to be _______.

 

CPI is based on changes in the prices of __________.

 

Consider a fully amortizing mortgage loan of $75,000 for 30 years (12 periods per year) with an interest rate of 12%. What is the loss if interest rates increase to 13%?

 

With a PLAM, the lender ________ bear the risk of changes in rate or risk premium.

 

A PLAM loan balance can _______.

 

Consider a fully amortizing mortgage loan of $75,000 for 25 years (12 periods per year) with an interest rate of 12%. What is the loss if interest rates increase to 13%?

 

An adjustable rate mortgage is used to finance:

 

Which of the following determine the expected yield of an ARM?

 

True or false: A PLAM provides a more timely adjustment for lenders than an ARM.

 

With a fixed rate mortgage, the        bears the interest rate risk.

 

Interest rate risk is        for a fixed rate mortgage.

 

An ARM may change the ability of a        to make mortgage payments.

 

A PLAM loan for 15 years at an annual interest rate of 3% and a balance of $150,000 was made. Suppose inflation increased by 3% over the first year. What is the new loan balance at the end of the first year?

 

An ARM loan for 30 years at an annual interest rate of 5% and a balance of $75,000 was made. Suppose the market index rises at the end of one year and the new interest rate on the ARM is 8%. What is the new monthly payment on the outstanding loan balance for the remaining 29 years?

 

Which of the following are mortgage loans where interest rates may change with market conditions?

 

Maximum caps will        the risk to borrowers of ARMS.

 

The amount of         rate risk held by the lender may be adjusted by changing the terms of an ARM.

 

Which provides for a more timely adjustment for lenders?

 

For a lender, interest rate risk of an ARM        (increases/decreases) with the adjustment interval.

 

A        incurred by lenders results in a        to borrowers.

 

An ARM loan for 30 years at an annual interest rate of 4% and a balance of $55,000 was made. Suppose the market index rises at the end of one year and the new interest rate on the ARM is 6%. What is the new monthly payment on the outstanding loan balance for the remaining 29 years?

 

A PLAM loan for 30 years at an annual interest rate of 3% and a balance of $50,000 was made. Suppose inflation increased by 2% over the first year. What is the new loan balance at the end of the first year?

 

A        cap limits the annual increase in monthly payments of an ARM loan.

 

At the time of origination, will an ARM or FRM have a higher expected yield?

 

Under an adjustable rate mortgage, who bears interest rate risk?

 

A 5/1 hybrid has how many years of a fixed rate?

 

A price level adjusted mortgage adjusts the loan balance by what?

 

A floating rate loan is used to finance:

 

If an ARM has an interest rate of an index plus 3% margin, what is the interest rate if the index is 8%?

 

The maximum interest rate on an ARM loan at a beginning rate of 7% with rates capped at 2% and 5% is?

 

The time it takes for payments to be adjusted under a PLAM is called:

 

Floating rate loans are typically used to finance which type of property?

 

Borrowers have an incentive to default on a PLAM loan when the CPI increases        house prices.

 

A price adjusted mortgage shifts the risk of changes in what from lenders to borrowers?

 

Consider a fully amortizing mortgage loan of $75,000 for 30 years with an interest rate of 12%. What is the loss if interest rates increase to 13%?

 

 

What components determine the expected yield of an ARM?             

an adjustable rate mortgage is used to finance          

an ARM may also be referred to as a floating payment loan              

ARMs eliminate all the lender’s interest rate risk                   

ARMs help lenders combat unanticipated inflation changes, interest rate changes, and a maturity gap           

ARMs were developed because lenders were tired of offering a limited selection of loan alternatives to borrowers                   

a borrower with an interest-only loan may end up owing more at the end of the loan than the original loan amount                   

the floor of an ARM is           

if one of the terms of an ARM read, interest is capped at 2%/5%, what would that mean?                

Lender’s can partially avoid estimating interest rates by tying an ARM to an interest rate index          

a loss incurred by lenders results in              

negative amortization reduces the principle balance of a loan            

what do maximum caps do               

which mortgage provides for a more timely adjustment for lenders              

With a fixed rate mortgage the _____ bears the interest rate risk and with an ARM the ______ bears the interest rate risk.              

 

 

After estimating initial values for r and p, how would the PLAM loan balance be adjusted?               

For ARM’s, what is the new calculated loan payment based on?                   

For ARM’s, what would a borrower look for?             

For fixed interest rate loans, why would the risk of loss not be offset by declining interest rates?                 

How do adjustable rate mortgages (ARM) reduce interest rate risk?              

How do ARMS loans provide an alternative way of financing, as opposed to fixed rate mortgages?               

How do PLAM loans work?               

In a PLAM, how is inflation measured?           

A PLAM loan for 30 years at an annual interest rate of 3% and a balance of $50,000 was made. Supposed inflation increased by 2% over the first year. What is the new loan balance at the end of the first year?           

What are adjustable rate mortgages - ARMS?            

What are floating rate loans?             

What does PLAM stand for?              

What do possess incurred by lenders result in for borrowers?            

What is a margin more commonly referred to?          

What is a margin (spread) when referring to ARM’s?              

What is an adjustable rate mortgage used to finance?           

What is an index when referring to ARM’s?               

What is the problem with using the CPI to measure inflation on a PLAM?                 

What process will continue each year for a PLAM loan?                   

Which provides for a more timely adjustment for lenders, ARM or PLAM?                 

With a fixed rate mortgage, who bears the interest rate risk?