Chapter 13 Straight line

Question 1

On a straight line principal reduction loan, the monthly payment:

(1) is a constant amount each month.
(2) pays interest only.
(3) pays principal only.
(4) declines over time.

Answer 1

4

Question 2

A mortgagor would prefer a straight line principal reduction plan to a constant payment plan if:

(1) the mortgagor wishes to delay repayment as long as possible.
(2) the mortgagor foresees his or her income decreasing.
(3) the mortgagor foresees his or her income increasing.
(4) the mortgagor wishes to keep his or her initial payments as low as possible.

Answer 2

2

Question 3

All other things being equal, the type of loan with the most risk to the lender is:

(1) an interest accruing loan.
(2) an interest only loan.
(3) a straight line principal reduction loan.
(4) a constant, blended payment loan.

Answer 3

1

Question 4

In which one of the following mortgage repayment schemes, do the monthly mortgage payments increase on a regular basis?

(1) reverse annuity mortgage
(2) graduated payment mortgage
(3) straight line principal reduction mortgage
(4) interest accruing mortgage

Answer 4

2

Question 5

With which one of the following loans is the lender’s initial capital and periodic income at the greatest risk?

(1) interest only loans
(2) interest accruing loans
(3) straight line principal reduction loans
(4) constant payment loans

Answer 5

2

Question 6

Between 1900-1920, were the primary form of repayment for residential mortgage financing, whereas after the Depression, were the primary form of repayment for residential mortgage financing.

(1) interest only loans; long-term fully amortized mortgages
(2) long-term fully amortized mortgages; interest only loans
(3) interest only loans; graduated payment mortgages
(4) partially amortized mortgages, straight line principal reduction loans

Answer 6

1