Mortgage and Derivatives Market Flashcards
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.
False. Foreign exchange risk
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
True
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.
False. Hedging, not speculation, establishment of netting centers, particularly for large multinational companies. Trigger pricing, and diversification are the ways to do so.
True or false. A market where borrowers can obtain a mortgage loan from a primary lender is financial market
False. Primary mortgage market
True or false. Banks, mortgage brokers, mortgage bankers, and credit unions are all secondary lenders and are part of the secondary mortgage market
False. they are all primary lenders and are part of the primary mortgage market
True or false. The market where lenders and investors buy and sell mortgages and their servicing rights is the primary mortgage market
False. Secondary mortgage market
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
False. Secondary mortgage market
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.
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.
True or false. Mortgage is an equity instrument that is secured by real estate
False. They are debt instrument
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
False. Conventional mortgage
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.
True
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
True
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.
False. It’s adjustable rate mortgage and they are reset based on a benchmark or index.
True or false. The mortgage carries a constant interest rate from beginning to end is the adjustable rate mortgages
False. Fixed rate mortgages
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
False. graduated payment mortgage
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
True
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
False :( Equity participating mortgages
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
True
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
false. securitization
True or false. Mortgage-backed security is secured by mortgage or collection of mortgages; a common type is the mortgage pass through
true
True or false. Debtors are the persons or group of entities investing in financial markets to reduce the risk of price volatility
False. hedgers
True or false. One of the purpose of hedgers is to eliminate the risk of present price movements
false. future price movements
True or false. The financial market for financial instruments such as future contracts or option is the mortgage market
false. derivatives market
True or false. The mortgage markets have 4 kinds of participants such as the hedgers, speculators, arbitrageurs, and the margin traders
false. it’s derivative market’s participants
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.
False. speculation
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
False. It’s risky
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.
False. speculators
True or false. Margin traders are the investors who are trading assets using funds by a third party.
true
