Mortgage and Derivatives Market

Question 1

True or False. A Domestic exchange risk is a financial risk that exists when a financial transaction is denominated in a currency other than the foreign currency of a business entity.

Answer 1

False. Foreign exchange risk

Question 2

True or false. Foreign exchange risk may lead to a decrease in revenue or an increase in cost in an international transaction due to a change in foreign exchange rates

Answer 2

True

Question 3

True or false. In preventing exchange rate risk in a foreign currency markets, hedging, speculation, establishment of netting centers, particularly for large multinational companies. Trigger pricing, and diversification are the ways to do so.

Answer 3

False. Hedging, not speculation, establishment of netting centers, particularly for large multinational companies. Trigger pricing, and diversification are the ways to do so.

Question 4

True or false. A market where borrowers can obtain a mortgage loan from a primary lender is financial market

Answer 4

False. Primary mortgage market

Question 5

True or false. Banks, mortgage brokers, mortgage bankers, and credit unions are all secondary lenders and are part of the secondary mortgage market

Answer 5

False. they are all primary lenders and are part of the primary mortgage market

Question 6

True or false. The market where lenders and investors buy and sell mortgages and their servicing rights is the primary mortgage market

Answer 6

False. Secondary mortgage market

Question 7

True or false. The purpose of the primary mortgage market is to give lenders a steady source of money to lend, while also alleviating the risk of owning the mortgage

Answer 7

False. Secondary mortgage market

Question 8

True or false. Mortgage is a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title does not become void upon payment of the debt.

Answer 8

False. Mortgage is a legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor’s property, with the condition that the conveyance of title BECOME void upon payment of the debt.

Question 9

True or false. Mortgage is an equity instrument that is secured by real estate

Answer 9

False. They are debt instrument

Question 10

True or false. The type of a mortgage loan that is not insured or guaranteed by the government, but backed by private lenders, and its insurance is usually paid by the borrower is the insured mortgages

Answer 10

False. Conventional mortgage

Question 11

True or false. Insured mortgages are protected by mortgage default insurance, the insurance protects the lender, not the borrower, against losses in the event of failure of mortgage payments of default on the loan.

Answer 11

True

Question 12

True or false. A second mortgage or junior-lien is a loan you take out while you still have another loan secured by your house

Answer 12

True

Question 13

True or false. The interest rate applied on the outstanding balance varies throughout the life of the loan, the interest rate for is not reset based on a benchmark or index is fixed rate mortage.

Answer 13

False. It’s adjustable rate mortgage and they are reset based on a benchmark or index.

Question 14

True or false. The mortgage carries a constant interest rate from beginning to end is the adjustable rate mortgages

Answer 14

False. Fixed rate mortgages

Question 15

True or false. It is where the payments increase gradually from an initial low base level to a higher final level; the payment starts out low and then gradually rises is the growing equity mortgage

Answer 15

False. graduated payment mortgage

Question 16

True or false. It is where the monthly payments increase over time according to a set schedule, rather than remaining fixed and equal over the loan term is the growing equity mortgage

Answer 16

True

Question 17

True or false. It is where the lender and the borrower undertake a joint investment and agree to a future division of profit or losses according to specified shares is the shared appreciation mortgages

Answer 17

False :( Equity participating mortgages

Question 18

True or false. it is where the borrower or purchaser of a home shares a percentage of the appreciation in the home’s value with the lender; in return for this additional compensation, the lender agrees to charge an interest rate which is below the prevailing market interest rate is the shared appreciation mortgage

Answer 18

True

Question 19

True or false. The financial practice of pooling various types of contractual debt such as residential mortgages, commercial mortgages, or other debt obligations and selling their related cash flows to third party investors as securities is called mortgage

Answer 19

false. securitization

Question 20

True or false. Mortgage-backed security is secured by mortgage or collection of mortgages; a common type is the mortgage pass through

Answer 20

true

Question 21

True or false. Debtors are the persons or group of entities investing in financial markets to reduce the risk of price volatility

Answer 21

False. hedgers

Question 22

True or false. One of the purpose of hedgers is to eliminate the risk of present price movements

Answer 22

false. future price movements

Question 23

True or false. The financial market for financial instruments such as future contracts or option is the mortgage market

Answer 23

false. derivatives market

Question 24

True or false. The mortgage markets have 4 kinds of participants such as the hedgers, speculators, arbitrageurs, and the margin traders

Answer 24

false. it’s derivative market’s participants

Question 25

True or false. Investment is the buying of an asset or financial instrument with the hope that the price of the financial instrument will increase in the future.

Answer 25

False. speculation

Question 26

True or false. Speculation is not a risky activity for the investors to engage i since it is driven by the motive of potentially earning lucrative profits in the future

Answer 26

False. It’s risky

Question 27

True or false. Hedgers are the persons or investors that engaged in the purchase of any financial instrument or an asset that an investor speculates to become significantly valuable in the future.

Answer 27

False. speculators

Question 28

True or false. Margin traders are the investors who are trading assets using funds by a third party.

Answer 28

true