QUESTION 1
If you hold a bond, you could have taxable income from this bond even though you received no cash flows from the bond.
True
False
QUESTION 2
Munis have an active secondary market.
True
False
QUESTION 3
Rule 144A increased the liquidity of the secondary market for registered securities.
True
False
QUESTION 4
In 2008, FNMA and GNMA were placed into conservatorship.
True
False
QUESTION 5
Hybrid ARMs are suitable for borrowers who do not plan on staying in their residence for more than 5 years.
True
False
QUESTION 6
You would be more likely to borrow through an ARM if you believed that interest rates were going to increase.
True
False
QUESTION 7
The FHA guarantees mortgage loans to (mostly) lower income households.
True
False
QUESTION 8
A MBS security issued by FNMA would have a slightly lower yield than a government bond with the same average maturity.
True
False
QUESTION 9
Because of the uncertainty in future cash flows, ARM rates are generally higher than fixed-rate mortgage rates for the same maturity.
True
False
QUESTION 10
Your current income is an important component of your FICO score.
True
False
QUESTION 11
A CMO is a pass-through security.
True
False
QUESTION 12
Creating a CMO reduces the total amount of risk in a mortgage-backed pool.
True
False
QUESTION 13
A _____ is a treasury security that has been partitioned into different securities.
Rule 144A bond
IDB bond
revenue bond
STRIP
QUESTION 14
The contract that defines the legal rights of bond issuers and bondholders is called the
covenant
debenture
encumbrance
indenture
QUESTION 15
ARMs reduce interest rate risk for
I. the borrower
II. the lender
I only
II only
I and II
Neither
QUESTION 16
Suppose you have a $1 million, 5% fixed rate mortgage with annual payments and a maturity of 30 years. What is your approximate annual payment?
$60,051
$65,051
$70,051
$75,051
none of the above
QUESTION 17
Suppose you have a $1 million, 5% fixed rate mortgage with annual payments, a maturity of 30 years and a balloon payment of $750,000. What is your approximate annual payment?
$50,763
$51,763
$52,763
$53,763
none of the above
QUESTION 18
Suppose your annual income is $50,000 and your lender will allow you to have a mortgage payment that combined with other debt payments and property taxes, which in your case amount to $500 per month, is no more than 33% of your monthly income. If the current 30-year mortgage rate is 5%, approximately how large a mortgage can you qualify for (assuming you have the required cash for the necessary down payment)?
$160,000
$161,000
$162,000
$163,000
none of the above
QUESTION 19
Which of the following borrowers would be considered subprime. One with a FICO score of
650
675
700
750
none of above
QUESTION 20
Which of the following purchase mortgages?
I. FNMA
II. FHLMC
III. GNMA
I and II only
I and III only
II and III only
all of the above
none of the above