Week 3

Question 1

The majority of each monthly payment at the beginning of a loan goes to pay…

Answer 1

Interest

Question 2

When viewing 2 installment loans with the same principal and annual percentage rate the loan with ____________

Answer 2

longer maturity will have the lower monthly payment and higher cost.

Question 3

When a market interest rate decreases, the bond :

Answer 3

price increases

Question 4

When leasing a car, the price is referred to as :

Answer 4

capitalized cost

Question 5

On a lease, the financing rate similar to the interest rate on a loan is referred to as :

Answer 5

money factor

Question 6

The purpose of an escrow account is to collect or pay for ______________________.

Answer 6

property taxes and insurance premiums

Question 7

If a homeowner owes more to a lender than what the property is worth, this would be called a :

Answer 7

negative mortgage

Question 8

A fee that is charged by a lender that raises the effective rate of interest is called :

Answer 8

mortgage points

Question 9

The monthly payment on your adjustable rate mortgage was $750. You are paying $690 as your monthly payment leading to an increase in the principle balance.

Answer 9

negative amortization

Question 10

What is a fixed rate mortgage?

Answer 10

rates and payments don’t change

Question 11

For a borrower to avoid having to pay private mortgage insurance, a lender will require a ratio of what percentage?

Answer 11

80%

Question 12

If a lender charged 0.5 points on a 310,000 mortgage which there is a $300,000 loan, the points would cold you ______________.

( points are divided by 100, then multiplied by the loan cost)

Answer 12

$1,500

Question 13

Bonds are issued by :

Answer 13

corporations and state, local, and federal governments