P3-52 quiz

Quiz Summary

0 of 8 Questions completed

Questions:

You have already completed the quiz before. Hence you can not start it again.

Quiz is loading…

You must sign in or sign up to start the quiz.

You must first complete the following:

Results

Quiz complete. Results are being recorded.

Results

0 of 8 Questions answered correctly

Your time:

You have reached 0 of 0 point(s), (0)

Question 1 of 8

1. Question

Why might a borrower who does not plan to stay in a home for a long period choose an ARM instead of a fixed-rate mortgage?

A) Because the ARM guarantees the interest rate will never change
Correct Incorrect Correct answer

B) Because the lower initial payments let them qualify for a larger loan and benefit before rates adjust
Correct Incorrect Correct answer

C) Because ARMs always have lower total finance charges than fixed-rate loans
Correct Incorrect Correct answer

D) Because ARMs require no income or asset verification
Correct Incorrect Correct answer

Correct

Incorrect
Question 2 of 8

2. Question

Most ARMs described in the text have a maximum annual interest rate increase of 2% and a maximum lifetime increase of 6%. If the initial rate is 4%, what is the highest rate this loan could ever reach?

A) 6%
Correct Incorrect Correct answer

B) 8%
Correct Incorrect Correct answer

C) 9%
Correct Incorrect Correct answer

D) 10%
Correct Incorrect Correct answer

Correct

Incorrect
Question 3 of 8

3. Question

Given the 2% annual cap and 6% lifetime cap described, what is the minimum number of years it would take for an ARM starting at 4% to reach its 10% lifetime cap, assuming the rate increases by the maximum amount each adjustment?

A) At least three years
Correct Incorrect Correct answer

B) One year
Correct Incorrect Correct answer

C) Two years
Correct Incorrect Correct answer

D) It could reach the cap immediately after the first adjustment
Correct Incorrect Correct answer

Correct

Incorrect
Question 4 of 8

4. Question

According to the text, what happens to a borrower’s interest rate on an ARM if the underlying index rates decline at the time of adjustment?

A) The interest rate must still increase by the maximum annual cap
Correct Incorrect Correct answer

B) The interest rate remains fixed at the original start rate
Correct Incorrect Correct answer

C) The borrower could receive a lower interest rate
Correct Incorrect Correct answer

D) The loan automatically converts to a fixed-rate mortgage
Correct Incorrect Correct answer

Correct

Incorrect
Question 5 of 8

5. Question

In the context of ARMs, how is an index defined in the text?

A) The lender’s internal profit margin on each loan
Correct Incorrect Correct answer

B) A statistic that indicates some current or financial condition
Correct Incorrect Correct answer

C) The borrower’s combined loan-to-value ratio
Correct Incorrect Correct answer

D) The appraised value used for underwriting
Correct Incorrect Correct answer

Correct

Incorrect
Question 6 of 8

6. Question

What is identified as a major disadvantage of using a Treasury Bill Index for ARM adjustments?

A) They are not recognized by any U.S. financial institution
Correct Incorrect Correct answer

B) They can only be used on fixed-rate mortgages
Correct Incorrect Correct answer

C) They are too stable and rarely change over time
Correct Incorrect Correct answer

D) Their volatility can cause large payment changes up to the maximum cap at each adjustment
Correct Incorrect Correct answer

Correct

Incorrect
Question 7 of 8

7. Question

Which statement best describes the 11th District Cost of Funds Index (COFI) as presented in the text?

A) It is a relatively stable, least-volatile index that lags market changes because it averages the cost of funds to 11th District institutions
Correct Incorrect Correct answer

B) It is the most volatile index, changing daily with stock prices
Correct Incorrect Correct answer

C) It reflects only short-term Treasury Bill yields
Correct Incorrect Correct answer

D) It is based solely on new mortgage loan rates in the San Francisco area
Correct Incorrect Correct answer

Correct

Incorrect
Question 8 of 8

8. Question

Which of the following is true about the London Inter-Bank Offered Rate (LIBOR), according to the text?

A) It is based on U.S. savings account rates in the 11th Federal Home Loan Bank District
Correct Incorrect Correct answer

B) It measures only long-term government bond yields
Correct Incorrect Correct answer

C) It is a daily reference rate for unsecured interbank borrowing in London and is being phased out by June 30, 2023
Correct Incorrect Correct answer

D) It is a fixed index that does not change over time
Correct Incorrect Correct answer

Correct

Incorrect

Quiz Summary

Information

Results

Results

Categories

1. Question

2. Question

3. Question

4. Question

5. Question

6. Question

7. Question

8. Question