Suppose that a borrower and a lender agree on the nominal
interest rate to be paid on a loan. Then inflation turns out to be
lower than they both expected.
Is the real interest rate on this loan higher or lower than
expected?
Use your own “made-up” figures for nominal interest rate,
expected inflation rate and actual inflation rate to explain your
answer in part “a”?
Does the lender gain or lose from this unexpectedly low
inflation? Does the borrower...
A borrower is offered a mortgage loan for $100,000 with an
interest rate of 10% and a 30-year amortization period with monthly
payments. The origination fee is 1% of the loan and the lender
charges two discount points. What is the effective interest
rate?
10%, 9%, 10.37%, or 10.24%?
Insurance that protects the lender in the event that the
borrower does not repay the mortgage is called:
Group of answer choices
good faith insurance.
homeowners’ insurance.
mortgage insurance.
settlement insurance.
If
a floating rate borrower hedges their interest rate risk by
entering a swap as the fixed rate payer, and the swap subsequently
develops a negative value:
a. Then the swap has not been an effective hedge
b. The cost of funds for the borrower will rise
c. Then the borrower has paid lower than expected interest to
their lender
d. The cost of funds will exceed the swap rate
e. Then the borrower has paid higher than expected interest...
a borrower takes out a 15 year mortgage loan for 100,000 with an
interest rate of 5% plus 3 points. what is the effective annual
interest rate on the loan if the loan is carried 15 years.
A borrower takes out a 20-year mortgage for $500,000 with an
interest rate of 6%. The loan requires monthly payments and has a
3% fee if the loan is repaid within 10 years. What is the effective
interest rate on the loan if the borrower repays the loan after 72
payments?
A borrower takes out a 20-year mortgage for $500,000 with an
interest rate of 6%. The loan requires monthly payments and has a
3% fee if the loan is repaid within 10 years. What is the effective
interest rate on the loan if the borrower repays the loan after 72
payments?
A borrower has a 30-year mortgage loan for $200,000 with an
interest rate of 6% and monthly payments. If she wants to pay off
the loan after 8 years, what would be the outstanding balance on
the loan? (D)
$84,886
$91,246
$146,667
$175,545
Not enough information
Please explain me the step on financial calculator. The answer
is D
A borrower has a 23-year mortgage loan for $464,103 with an
interest rate of 6% and monthly payments. If she wants to pay off
the loan after 9 years, what would be the outstanding balance on
the loan?
17.
When interest rates fall, a fixed interest rate mortgage lender
will experience the following except
Select one:
a. the value of fixed mortgages will increase as a result of the
fall in interest rate.
b. the value of the fixed mortgages will decline as a result of
the fall in interest rate.
c. the mortgages may be repaid earlier and the lender may have
to reinvest the proceeds at a much lower rare.
d. a negative cash flow may...