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| 1 | |
The return on mortgage-backed securities is based on a pool of mortgages. |
| | A) | True |
| | B) | False |
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| 2 | |
A mortgage prepayment is defined as one lump sum payment of the mortgage principal prior to the final payment date established by the amortization schedule. |
| | A) | True |
| | B) | False |
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| 3 | |
Collateralized mortgage obligations are created by distributing the cash flows from a mortgage pool according to predefined allocation rules. |
| | A) | True |
| | B) | False |
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| 4 | |
The process of converting individual mortgages into mortgage-backed financial instruments is called mortgage: |
| | A) | refinancing. |
| | B) | allocation. |
| | C) | aggregation. |
| | D) | consolidation. |
| | E) | securitization. |
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| 5 | |
Currently, you have a mortgage balance of $152,600. The annual interest rate is 7.75 percent and you make monthly payments of $1,167.51. There are 24.5 years remaining on your mortgage term. By how much will your monthly payment change if you can refinance this mortgage at 7 percent? Assume there are no costs to refinance. |
| | A) | $57.20 |
| | B) | $63.42 |
| | C) | $80.80 |
| | D) | $87.09 |
| | E) | $94.00 |
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| 6 | |
You want to borrow $350,000 to build a new home. The interest will be 8 percent annually with payments made monthly. If you finance this amount for 20 years, instead of 30 years, you monthly payment will increase by _____ but you will save a total of ______ in interest over the life of the mortgage. |
| | A) | $359.36; $178,281.43 |
| | B) | $359.36; $221,935.20 |
| | C) | $359.36; $247,165.40 |
| | D) | $501.68; $186,407.19 |
| | E) | $501.68; $223,649.25 |
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| 7 | |
What is the single monthly mortality assuming the conditional prepayment rate is 5.6 percent? |
| | A) | 0.4791 percent |
| | B) | 0.4834 percent |
| | C) | 0.4929 percent |
| | D) | 0.5118 percent |
| | E) | 0.5137 percent |
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| 8 | |
Assume that all the mortgagees in a GNMA mortgage pool are prepaying their mortgages on a monthly basis. This means the monthly:- interest payments are increasing each month.
- interest payments are decreasing each month.
- scheduled amortization of mortgage principal payments are constant each month.
- mortgage principal prepayments are positive each month.
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| | A) | I and III only |
| | B) | II and IV only |
| | C) | I and IV only |
| | D) | II, III, and IV only |
| | E) | I, II, III, and IV |
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| 9 | |
If you are a retiree and desire a high level of payment certainty, you are most apt to invest in a: |
| | A) | IO strip bond. |
| | B) | PAC bond. |
| | C) | PAC support bond. |
| | D) | C-tranche sequential CMO. |
| | E) | Z-tranche sequential CMO. |
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| 10 | |
If you purchase a PAC 100/300 bond expecting to receive the specified cash flows, you are assuming that the prepayments: |
| | A) | will exactly follow the PSA 100 schedule. |
| | B) | will exactly follow the PSA 300 schedule. |
| | C) | will remain above the PAC collar. |
| | D) | will remain below the PAC collar. |
| | E) | will remain within the PAC collar. |
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