Ree4204 Midterm Exam Questions With Correct Answers

Ree4204 Midterm Exam Questions With Correct Answers The term real property refers to - ANSWER a set of legal rights to use and dispose land and/or buildings Real Estate Investment Trust (REIT) belongs to which of the following category? - ANSWER Public equity Which of the following is not considered as a thrift institution? - ANSWER Mortgage bank Based on class discussion, the financial market is typically classified into two categories- - ANSWER Capital markets and money markets Money market instruments are those that mature in less than - ANSWER One year The chance of a lender not being able to get back all principle and interest of a loan in a timely fashion defines - ANSWER Default risk The market value of short term bonds is less sensitive to changes in interest rate than do long term bonds. This is mainly because the two kinds of bonds have different - ANSWER Maturity risks If the nominal interest rate is 5.6%, real rate is 3%, and investors demand a 1.5% risk premium. What is the expected inflation according to fisher equation? - ANSWER 1.1% If you observe today's yield on one year T-bills is 5% and in two year T bonds is 5.4%, can you tell what the market expects the one year yield to be one year from now? - ANSWER 5.8% If you observe today's yield on one year T bills is 5.4%, and on two year t bonds is 5%, what can you conclude about the market expectation on the trend of interest rate next year? - ANSWER The rate is expected to decline Although mortgage and mortgage loan are often used interchangeably, there is a difference. Mortgage is legally - ANSWER a document which names a piece of real estate as collateral of a loan Which part is "constant" in a constant amortization loan (CAM) - ANSWER the principle part of each payment If you borrow $50,000 constant amortization mortgage at 10% for 25 years, assuming annual payment, what is your total mortgage payment (principle + interest) in year 1? - ANSWER $7000 If you borrow $50,000 constant amortization mortgage at 10% for 25 years, assuming annual payment, what is your total mortgage payment in year 11? - ANSWER $5000 In comparison to the first months payment of constant amortization mortgage (other things being equal) the first months payment of constant payment mortgage is - ANSWER Lower