Partially amortizing mortgage loans require periodic

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10. Partially amortizing mortgage loans require periodic payments of principal, but are not paid off completely over the loan's term to maturity. Instead, the balance of the principal amount is paid at maturity in what is commonly referred to as a: A. balloon payment B. early payment C. up-front payment D. payment cap Difficulty: Basic Learning Objective: 3 11. With the recent popularity of adjustable-rate mortgages (ARM), lenders have begun to offer ARMs with different adjustment periods. Which of the following ARM choices will most likely have the highest initial rate? Difficulty: Intermediate Learning Objective: 5 12. In considering a three-year-one-year adjustable-rate mortgage (ARM), the interest rate will be fixed for how many years? Difficulty: Basic Learning Objective: 5 15-9
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Chapter 15 - Mortgage Calculations and Decisions 13. One reason why adjustable-rate mortgages (ARMs) have become popular has to do with the impact that they have on the interest rate risk that is borne by the parties involved. If interest rates were to rise on a level-payment mortgage (LPM) the interest rate risk of the loan would typically be borne by: Difficulty: Basic Learning Objective: 5 14. To encourage borrowers to accept adjustable rate mortgages (ARMs) rather than level- payment mortgages, mortgage originators generally offer an initial short-term introductory rate that is less than the prevailing market mortgage rate. This rate is referred to as a(n): A. floating rate B. teaser rate C. index rate D. discount rate Difficulty: Basic Learning Objective: 5 15. Given the following information on a fixed-rate loan, determine the maximum amount that the lender will be willing to provide to the borrower. Loan Term: 30 years, Monthly Payment: $800, Interest Rate: 6%. Difficulty: Basic Learning Objective: 1 15-10
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Chapter 15 - Mortgage Calculations and Decisions 16. Given the following information on a 30-year fixed-payment loan, determine the remaining balance that the borrower has at the end of seven years. Interest Rate: 7%, Monthly Payment: $1,200. Difficulty: Intermediate Learning Objective: 1 17. Given the following information on an interest-only mortgage, calculate the monthly mortgage payment. Loan amount: $56,000, Term: 15 years, Interest Rate: 7.5%. Difficulty: Basic Learning Objective: 1 18. Given the following information, calculate the balloon payment for a partially amortized mortgage. Loan amount: $84,000, Term to maturity: 7 years, Amortization Term: 30 years, Interest rate: 4.5%, Monthly Payment: $425.62. A. $9,458 B. $30,620 C. $73,103 D. $84,000 Difficulty: Intermediate Learning Objective: 1 15-11
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Chapter 15 - Mortgage Calculations and Decisions 19. Given the following information, calculate the lender's yield. Loan amount: $166,950, Term: 30 years, Interest rate: 8 %, Payment: $1,225.00, Discount points: 2. Difficulty: Advanced Learning Objective: 2 20. Given the following information, calculate the effective borrowing cost (EBC). Loan amount: $166,950, Term: 30 years, Interest rate: 8 %, Payment: $1,225.00, Discount points: 2, Other Closing Expenses: $3,611. Difficulty: Advanced Learning Objective: 2 15-12
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