FIN 455 QUIZ 1-6 TEST 1 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026

FIN 455 QUIZ 1-6 TEST 1 QUESTIONS ANSWERED CORRECTLY LATEST UPDATE 2026 A loan in which the borrower arranges in advance with a total amount that will be advanced in stages, such as a construction loan is said to have which type of mortgage loan: a) Non-recourse b) Assumption c) Subordination d) Open-end - Answers d) Open-end A mortgage is BEST defined as a legal document that: a) Names real estate as the security or collateral for the repayment of the loan b) Conveys ownership of a property to its purchaser c) Defines a possessory interest in real estate d) Create an obligation to repay a loan under specific terms - Answers a) Names real estate as the security or collateral for the repayment of the loan A mortgage is the same thing as a note. True/False - Answers False A property is encumbered as follows: First mortgage, A: $240,000 Second mortgage, B: $40,000 Third mortgage, C: $10,000 How much can mortgagee B pay for the property at a foreclosure sale without having to raise additional funds? a) $290,000 b) $280,000 c) $240,000 d) $40,000 - Answers b) $280,000 A(n) ________ estate represents the most complete form of ownership of real estate; the owner is free to divide it up into lesser estates and sell, lease, or borrow against them as he or she wishes. a) Life b) Leasehold c) Fee simple d) Freehold e) Outright - Answers c) Fee simple At 6%, the present value of a $1 payment in 12 months is .941905. At 7%, the present value of a $1 payment in 12 months is .950342. True/False - Answers False If a lender is to repossess or bring about the sale of a property if the borrower defaults on the mortgage loan, the lender is said to have a ________ in the real estate. a) Freehold interest b) Quitclaim c) Lease interest d) Secured interest - Answers d) Secured interest If you deposit $1,000 in an account that earns 6% per year, compounded annually, you will have $1,338 at the end of 5 years. What would be the balance in the account at the end of 5 years if interest compounds monthly? a) $1000 b) $1282 c) $1300 d) $1349 - Answers d) $1349 Real estate is property, which can be either a tangible or an intangible asset. Which of the following would be considered an intangible asset? a) mortgage b) fence c) land d) building - Answers a) mortgage Real property refers to the ownership rights associated with real estate. True/False - Answers True Which of the following would be considered a tangible asset? a) listed REIT b) land c) mortgage d) lease agreement - Answers b) land Your friend has a trust fund that will pay him $150,000 at the end of 9 years. Your friend, however, wants his money today. He promises to sign his trust fund over to you if you give him some money today. You require a 15% interest rate on money you lend to friends. How much would you be willing to lend under these terms? a) $0- it would be impossible to earn 15% on the loan b) $42,639 c) $150,000 d) $50,000 - Answers b) $42,639 Your friend just won the lottery. He has a choice of receiving $60,000 a year for the next 15 years or a lump sum today. The lottery uses a 10% discount rate. What would be the lump sum your friend would receive? a) $500,000 b) $456,365 c) $316,426 d) $900,000 - Answers b) $456,365 A borrower takes out a 30-year adjustable rate mortgage loan for $250,000 with monthly payments. The first two years of the loan have a "teaser" rate of 4.5%, after that, the rate can reset with a 2% annual rate cap. On the reset date, the composite rate is 5.5%. What would the Year 3 monthly payment be? a) $1,267 b) $1,412 c) $1,580 d) $955 e) Because of the rate cap, the payment would not change. - Answers b) $1,412