REE 4204 SIRMANS EXAM 1
QUESTIONS WITH VERIFIED
ANSWERS
1980's - Answer--depository insititutions deregulations and monetary control act
-garn st germain act-introduced competition and incentives for risk taking
-widespread saving and loan failures do to deregulation
1990's - Answer--dominance of government sponsered enterprises
-baby boomers increase demand for housing
-low mortgage intrest rates
2000's - Answer--housing market craze
-housing prices were raised over 80%
-sharp drop of market priced due to unsold homes
-several wall street firms demolished and fannie mae and freddie mac were taken over
by gov
-rebound in housing prices now we have historically low interest rates
Amortization of a mortgage - Answer--as time goes up interest payments get smaller
due to the decreasing principal amount borrowed, and repayment of the principal
portion increases
outstanding balance of the mortgage - Answer--the outstanding balance is the present
value of the remaining stream of payments, discounted at the contract rate
factors affecting interest rate - Answer--increase in loan amount
-loan term
-lock in period
-down payment
-discount points
-credit score
effective cost of the mortgage - Answer--borrowers actual percentage cost of borrowing
-affected by loan fees charged by the lender
discount points - Answer-lower the contract rate which lowers the payment rate, interest
rate goes down, pays off quicker
annual percentage rate - Answer-effective borrowing cost of a loan, assuming it is held
to maturity
bi-weekly mortgage - Answer-reduces the payment period for the mortgage, holding the
amount and the interest rate constant
, prepayment protection mortgage - Answer--borrower give uo the right to prepay the
mortgage without penalty in exchange for a lower interest rate
negative discount points - Answer--cash payment from lender to the borrower-which will
raise the contract rate
-contract inrest rate would be above par
fixed mortgage and interest rate risk - Answer--interest rate risk-risk of loss due to
changes in the market interest rates
-market values of fixed rate mortgages change inversely with market rate changes
The mortgage constant calculates the payment per dollar borrowed at a given interest
rate and term. - Answer-True
Finance - Answer--study of the process, institutions,markets and instruments used to
transfer money and credit between individuals, business, and gov
applied economics - Answer--study of the allocation of resources for the purpose of
producing goods and services for various members of society
-considers time value of money and implications of the interest rates
-focused on cash flows not profts
-makes extensive use of the concept of risk
Real estate finance - Answer--study of institutions, markets, and instruments used to
transfer money and credit for the purpose of developing or acquiring real property
real property - Answer--rights,powers, and privileges associated with the use of real
estate
real estate - Answer-land and all the fixed immovable improvements on it
Environment of real estate - Answer-the institutions that create and purchase real
property and the markets within which they are transferred
financial intermediaries - Answer--the financial institutions that channel funds from the
surplus income units to the deficit income units
-commercial banks
-thrift instituions- S&L associations and mutual savings banks
-investment companies-pool the funds of savers and invest the funds in a portfolio of
assets
- insurance companies- receive periodic or lump sum payments from individiudals or
organizations in return for a promise to make future payments if certain events occur
-pension funds
Direct financing - Answer-- when the flow of funds takes the place without the use of
intermediaries
primary mortgage market - Answer--market where mortgages are originated
QUESTIONS WITH VERIFIED
ANSWERS
1980's - Answer--depository insititutions deregulations and monetary control act
-garn st germain act-introduced competition and incentives for risk taking
-widespread saving and loan failures do to deregulation
1990's - Answer--dominance of government sponsered enterprises
-baby boomers increase demand for housing
-low mortgage intrest rates
2000's - Answer--housing market craze
-housing prices were raised over 80%
-sharp drop of market priced due to unsold homes
-several wall street firms demolished and fannie mae and freddie mac were taken over
by gov
-rebound in housing prices now we have historically low interest rates
Amortization of a mortgage - Answer--as time goes up interest payments get smaller
due to the decreasing principal amount borrowed, and repayment of the principal
portion increases
outstanding balance of the mortgage - Answer--the outstanding balance is the present
value of the remaining stream of payments, discounted at the contract rate
factors affecting interest rate - Answer--increase in loan amount
-loan term
-lock in period
-down payment
-discount points
-credit score
effective cost of the mortgage - Answer--borrowers actual percentage cost of borrowing
-affected by loan fees charged by the lender
discount points - Answer-lower the contract rate which lowers the payment rate, interest
rate goes down, pays off quicker
annual percentage rate - Answer-effective borrowing cost of a loan, assuming it is held
to maturity
bi-weekly mortgage - Answer-reduces the payment period for the mortgage, holding the
amount and the interest rate constant
, prepayment protection mortgage - Answer--borrower give uo the right to prepay the
mortgage without penalty in exchange for a lower interest rate
negative discount points - Answer--cash payment from lender to the borrower-which will
raise the contract rate
-contract inrest rate would be above par
fixed mortgage and interest rate risk - Answer--interest rate risk-risk of loss due to
changes in the market interest rates
-market values of fixed rate mortgages change inversely with market rate changes
The mortgage constant calculates the payment per dollar borrowed at a given interest
rate and term. - Answer-True
Finance - Answer--study of the process, institutions,markets and instruments used to
transfer money and credit between individuals, business, and gov
applied economics - Answer--study of the allocation of resources for the purpose of
producing goods and services for various members of society
-considers time value of money and implications of the interest rates
-focused on cash flows not profts
-makes extensive use of the concept of risk
Real estate finance - Answer--study of institutions, markets, and instruments used to
transfer money and credit for the purpose of developing or acquiring real property
real property - Answer--rights,powers, and privileges associated with the use of real
estate
real estate - Answer-land and all the fixed immovable improvements on it
Environment of real estate - Answer-the institutions that create and purchase real
property and the markets within which they are transferred
financial intermediaries - Answer--the financial institutions that channel funds from the
surplus income units to the deficit income units
-commercial banks
-thrift instituions- S&L associations and mutual savings banks
-investment companies-pool the funds of savers and invest the funds in a portfolio of
assets
- insurance companies- receive periodic or lump sum payments from individiudals or
organizations in return for a promise to make future payments if certain events occur
-pension funds
Direct financing - Answer-- when the flow of funds takes the place without the use of
intermediaries
primary mortgage market - Answer--market where mortgages are originated
