FinalExamStudyGuide_400X_fa10

FinalExamStudyGuide_400X_fa10 - Study guide for 400X Final...

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Study guide for 400X Final Exam All slides and lecture material from Adjustable Rate Mortgages onward is fair game. The computational material is covered on Homework #3 and #4. Format of the exam: TRUE-FALSE Conceptual Multiple Choice Computational Multiple Choice The Final Exam will be 20 points. Approximately 60% will be computational and 40% conceptual. To help you study: Focus in particular on anything that I’ve stated as a “rule of thumb,” whether in the slides or something I’ve just written on the board in class. Know how to calculate payments and yields on ARMS with no restrictions, with interest rate caps, and with payment caps Know how to measure risk through partitioning of the IRR. Know how to calculate r, y, and g, given initial property values, ending property values and cash flows Understand how leverage changes risk, and when increasing leverage is good or bad. Focus on concepts that have lists attached to them. For instance, the determinants of interest rates or mortgage underwriting practices Know how to calculate the incremental cost of borrowing and, as a specific case, how to compare a wraparound to a separate first and second mortgage. Know how to analyze a refinancing opportunity and what the benchmark is for determining whether it’s a good idea. Know how to calculate the market value of a loan, and how changes in interest rates qualitatively impact market value. Understand how to calculate the financing premium that may be attached to a home with below-market financing. Know what the terms “par value” or “face value” and “market value” mean. Know how to calculate any particular value in a levered pro-forma (using your
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FinalExamStudyGuide_400X_fa10 - Study guide for 400X Final...

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