Question 1

Generally,the average life of a mortgage is ________ the mortgage's stated maturity.

Accepted Answer

A)  much less than 
B)  marginally less than 
C)  equal to 
D)  marginally greater than 
E)  significantly greater than 
A)  much less than 
B)  marginally less than 
C)  equal to 
D)  marginally greater than 
E)  significantly greater than

Question 2

GNMA mortgage pools are based on mortgages issued by which of the following?
I.FHLMC
II.FNMA
III.FHA
IV.FmHA

Accepted Answer

A)  I and II only 
B)  II and III only 
C)  III and IV only 
D)  I, II, and IV only 
E)  I, II, III, and IV 
A)  I and II only 
B)  II and III only 
C)  III and IV only 
D)  I, II, and IV only 
E)  I, II, III, and IV

Question 3

You took out a 20-year,$125,000,4.5 percent loan 8 years ago.What is your current principal balance,assuming payments are made monthly?

Accepted Answer

A)  $58,588 
B)  $65,130 
C)  $74,988 
D)  $87,867 
E)  $88,889 
A)  $58,588 
B)  $65,130 
C)  $74,988 
D)  $87,867 
E)  $88,889

Question 4

You recently assumed a 15-year mortgage for $250,000 at 3.5 percent interest.How much of the second monthly payment will be applied to the principal balance?

Accepted Answer

A)  $563.02 
B)  $682.02 
C)  $726.08 
D)  $810.52 
E)  $934.18 
A)  $563.02 
B)  $682.02 
C)  $726.08 
D)  $810.52 
E)  $934.18

Question 5

Which one of the following is NOT a reason why mortgage prepayments occur?

Accepted Answer

A)  house securing the mortgage is sold 
B)  increase in interest rates 
C)  homeowner's spouse dies 
D)  homeowner faces job transfer 
E)  home is refinanced 
A)  house securing the mortgage is sold 
B)  increase in interest rates 
C)  homeowner's spouse dies 
D)  homeowner faces job transfer 
E)  home is refinanced

Question 6

You are currently borrowing $175,000 to buy a house.The mortgage is for 15 years at 6 percent.How much would you save each month if you could finance this amount at 5 percent for the same time period?

Accepted Answer

A)  $84.37 
B)  $86.27 
C)  $88.95 
D)  $90.24 
E)  $92.86 
A)  $84.37 
B)  $86.27 
C)  $88.95 
D)  $90.24 
E)  $92.86

Question 7

A PAC support bond is most similar to which tranche in a sequential CMO?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  Z 
E)  A PAC bond cannot be compared to a sequential CMO. 
A)  A 
B)  B 
C)  C 
D)  Z 
E)  A PAC bond cannot be compared to a sequential CMO.

Question 8

The CPR for a seasoned 150 PSA mortgage is 0.9 percent.What is the single monthly mortality?

Accepted Answer

A)  0.7885 percent 
B)  0.8158 percent 
C)  0.8349 percent 
D)  0.8650 percent 
E)  0.8829 percent 
A)  0.7885 percent 
B)  0.8158 percent 
C)  0.8349 percent 
D)  0.8650 percent 
E)  0.8829 percent

Question 9

Which one of the following is correct concerning the total payment amount on a PO strip?

Accepted Answer

A)  The total payment amount equals the bond's par value. 
B)  The total payment amount will either equal or exceed the bond's par value. 
C)  The total payment will vary based on the PSA schedule. 
D)  The total payment amount will increase if interest rates decline. 
E)  The total payment amount will vary if the prepayment rate varies. 
A)  The total payment amount equals the bond's par value. 
B)  The total payment amount will either equal or exceed the bond's par value. 
C)  The total payment will vary based on the PSA schedule. 
D)  The total payment amount will increase if interest rates decline. 
E)  The total payment amount will vary if the prepayment rate varies.

Question 10

You have a 20-year,$225,000 mortgage at 4 percent interest.What is the amount of your mortgage prepayment if you pay $1,700 as your second mortgage payment? Assume your first payment was the agreed upon amount.

Accepted Answer

A)  $201.93 
B)  $218.25 
C)  $228.30 
D)  $236.54 
E)  $249.65 
A)  $201.93 
B)  $218.25 
C)  $228.30 
D)  $236.54 
E)  $249.65

Question 11

A mortgage prepayment is similar to which one of the following features of a corporate bond?

Accepted Answer

A)  collateral provision 
B)  put provision 
C)  call provision 
D)  conversion provision 
E)  protective covenants provision 
A)  collateral provision 
B)  put provision 
C)  call provision 
D)  conversion provision 
E)  protective covenants provision

Question 12

You own a mortgage passthrough.Which one of the following statements correctly describes the payments you will receive on that security?

Accepted Answer

A)  The payments will decrease at a constant rate over the life of the security. 
B)  The payments will increase at a decreasing rate over the life of the security. 
C)  The payments will be fixed for the life of the security. 
D)  The payments will vary depending upon the amount paid on the underlying mortgages each period. 
E)  The payments will decrease based on the interest shown on the amortization schedule. 
A)  The payments will decrease at a constant rate over the life of the security. 
B)  The payments will increase at a decreasing rate over the life of the security. 
C)  The payments will be fixed for the life of the security. 
D)  The payments will vary depending upon the amount paid on the underlying mortgages each period. 
E)  The payments will decrease based on the interest shown on the amortization schedule.

Generally,the average life of a mortgage is ________ the mortgage's stated maturity.

GNMA mortgage pools are based on mortgages issued by which of the following? I.FHLMC II.FNMA III.FHA IV.FmHA

You took out a 20-year,$125,000,4.5 percent loan 8 years ago.What is your current principal balance,assuming payments are made monthly?

You recently assumed a 15-year mortgage for $250,000 at 3.5 percent interest.How much of the second monthly payment will be applied to the principal balance?

Which one of the following is NOT a reason why mortgage prepayments occur?

You are currently borrowing $175,000 to buy a house.The mortgage is for 15 years at 6 percent.How much would you save each month if you could finance this amount at 5 percent for the same time period?

A PAC support bond is most similar to which tranche in a sequential CMO?

The CPR for a seasoned 150 PSA mortgage is 0.9 percent.What is the single monthly mortality?

Which one of the following is correct concerning the total payment amount on a PO strip?

You have a 20-year,$225,000 mortgage at 4 percent interest.What is the amount of your mortgage prepayment if you pay $1,700 as your second mortgage payment? Assume your first payment was the agreed upon amount.

A mortgage prepayment is similar to which one of the following features of a corporate bond?

You own a mortgage passthrough.Which one of the following statements correctly describes the payments you will receive on that security?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

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Exam 20: Mortgage-Backed Securities

Generally,the average life of a mortgage is ________ the mortgage's stated maturity.

GNMA mortgage pools are based on mortgages issued by which of the following? I.FHLMC II.FNMA III.FHA IV.FmHA

You took out a 20-year,$125,000,4.5 percent loan 8 years ago.What is your current principal balance,assuming payments are made monthly?

You recently assumed a 15-year mortgage for $250,000 at 3.5 percent interest.How much of the second monthly payment will be applied to the principal balance?

Which one of the following is NOT a reason why mortgage prepayments occur?

You are currently borrowing $175,000 to buy a house.The mortgage is for 15 years at 6 percent.How much would you save each month if you could finance this amount at 5 percent for the same time period?

A PAC support bond is most similar to which tranche in a sequential CMO?

The CPR for a seasoned 150 PSA mortgage is 0.9 percent.What is the single monthly mortality?

Which one of the following is correct concerning the total payment amount on a PO strip?

You have a 20-year,$225,000 mortgage at 4 percent interest.What is the amount of your mortgage prepayment if you pay $1,700 as your second mortgage payment? Assume your first payment was the agreed upon amount.

A mortgage prepayment is similar to which one of the following features of a corporate bond?

You own a mortgage passthrough.Which one of the following statements correctly describes the payments you will receive on that security?

A Brief History of Risk and Return

The Investment Process

Overview of Security Types

Mutual Funds and Other Investment Companies

The Stock Market

Common Stock Valuation

Stock Price Behavior and Market Efficiency

Behavioral Finance and the Psychology of Investing

Interest Rates

Bond Prices and Yields

Diversification and Risky Asset Allocation

Return,Risk,and the Security Market Line

Performance Evaluation and Risk Management

Futures Contracts

Stock Options

Option Valuation

Projecting Cash Flow and Earnings

Corporate and Government Bonds

Global Economic Activity and Industry Analysis

Filters