Real Estate Finance & Investments 16th Edition by William B Brueggeman – Test Bank
Real Estate Finance & Investments, 16e (Brueggeman)
Chapter 4 Fixed Interest Rate Mortgage Loans
1) Inflation makes very little difference to lenders of and investors needing money.
Answer: FALSE
Difficulty: 1 Easy
Topic: Mortgage characteristics
Accessibility: Keyboard Navigation
Gradable: automatic
2) Lenders and investors worry about default, interest rate, marketability, and liquidity risks.
Answer: TRUE
Difficulty: 1 Easy
Topic: Mortgage characteristics
Accessibility: Keyboard Navigation
Gradable: automatic
3) One difference between the constant amortizing mortgage (CAM) and the constant payment mortgage (CPM) is the interest paid and loan amortization relationship. With a CAM, the loan amortization and interest paid are directly related and with the CPM the loan amortization and the interest paid are inversely related.
Answer: TRUE
Difficulty: 2 Medium
Topic: Mortgage characteristics
Accessibility: Keyboard Navigation
Gradable: automatic
4) Determining a loan balance on a CPM is a simple present value of an annuity problem.
Answer: TRUE
Difficulty: 1 Easy
Topic: Mortgage characteristics
Accessibility: Keyboard Navigation
Gradable: automatic
5) The effective interest rate on a mortgage will always be higher than the stated rate of the loan.
Answer: FALSE
Difficulty: 2 Medium
Topic: Effective rates
Accessibility: Keyboard Navigation
Gradable: automatic
6) Truth-in-lending requires the borrower to tell the truth on the loan application.
Answer: FALSE
Difficulty: 1 Easy
Topic: Effective rates
Accessibility: Keyboard Navigation
Gradable: automatic
7) The annual percentage rate closely approximates the borrower’s true cost of funds.
Answer: FALSE
Difficulty: 1 Easy
Topic: Effective rates
Accessibility: Keyboard Navigation
Gradable: automatic
8) Prepayment penalties increase the lender’s mortgage yield and discount points decrease it.
Answer: FALSE
Difficulty: 2 Medium
Topic: Effective rates
Accessibility: Keyboard Navigation
Gradable: automatic
9) Origination fees are tax deductible as an interest expense.
Answer: FALSE
Difficulty: 2 Medium
Topic: Effective rates
Accessibility: Keyboard Navigation
Gradable: automatic
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