Chapter 16 Math Random Flashcards
As a marketing incentive to speed up the sale of newly completed but unsold condominiums, a developer agrees to provide the purchasers with first mortgages with a contract rate that is lower than the market rate of interest. Under these circumstances, it can be said that this is an offer involving:
(1) below-market rate financing.
(2) market rate financing.
(3) above-market rate financing.
(4) interest only financing.
1
Given that all other factors are identical, the longer the term of the contract on a bonused, partially amortized mortgage (where the bonus is paid by the borrower):
(1) the lower the effective interest rate paid by the borrower.
(2) the higher the effective interest rate paid by the borrower.
(3) the higher the required monthly payment.
(4) the higher the outstanding balance at the term’s end.
1
Sam and Sally recently negotiated a second mortgage in the amount of $25,000 at an interest rate of 9% per annum, compounded semi-annually. The loan is to be amortized over 20 years by monthly payments.
As a result of a $3,000 brokerage fee, assume that only $22,000 of the loan’s $25,000 face value is advanced to Sam and Sally. The effective annual rate of interest charged on the funds advanced will be:
(1) less than the effective annual equivalent of the contract interest rate.
(2) equal to the effective annual equivalent of the contract interest rate.
(3) greater than the effective annual equivalent of the contract interest rate.
(4) impossible to determine with the information provided.
3
Given that all other factors are identical, the shorter the term of the contract on a bonused, partially amortized mortgage (where the bonus is paid by the borrower):
(1) the lower the effective interest rate paid by the borrower.
(2) the higher the effective interest rate paid by the borrower.
(3) the higher the required monthly payment.
(4) the lower the outstanding balance at the term’s end.
2
The Annual Percentage Rate (APR) is:
(1) a requirement under the Federal Interest Act.
(2) also known as the stated interest rate.
(3) the borrower’s contractual interest rate plus any non-interest finance charges.
(4) an interest rate that must be expressed with semi-annual compounding.
3
With a portable mortgage:
(1) a purchaser takes over responsibility for the remaining contractual terms of an existing mortgage.
(2) a borrower can save money when the existing mortgage has a lower interest rate than current market rates.
(3) the vendor creates a vendor-supplied mortgage.
(4) the portable funds fee (PFF) is always charged.
2
Which of the following statements concerning the Business Practices and Consumer Protection Act (BPCPA) is FALSE?
(1) Mortgage lenders and brokers must disclose the Annual Percentage Rate (APR) to the borrower.
(2) The Annual Percentage Rate (APR) represents the borrower’s contactual interest rate plus any non- interest finance charges.
(3) A disclosure statement must be given to a borrower six days prior to the borrower incurring an obligation under a credit agreement, unless the time period is waived by the borrower.
(4) In order to provide borrowers with some help in determining the actual cost of borrowing, most provincial governments in Canada have legislated that certain disclosure requirements must be met for specific types of mortgages.
3
as one lowers a discount (or expected yield rate) the present value of a given series of future payments
- decreases
- could go up or down depending on the timing of the payments
- increases
- remains constant
3
what is a portable mortgage?
Porting your mortgage means taking your existing mortgage—along with its current rate and terms—from your current home to your new home. You can port your mortgage if you’re purchasing a new property at the same time you’re selling your existing one.
