FIN364 all weeks discussion, homework, midterm and assignments
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FIN364
all weeks discussion, homework, midterm and assignments
Devry
FIN364 Week 1 Discussion DQ 1 & DQ 2
DQ
1
|
Financial Institutions (graded)
|
Financial
institutions are classifiable by their origins, purposes, and major
characteristics. What is the role of financial institutions as a part of
financial systems? What are the main types of financial institutions, and what
are the characteristics of the markets each institution serves? What are the
risks that each type of institution faces, and can these risks change according
to varying economic conditions? Which types of risk are most important to each
type of institution? Why?
DQ
2
|
Efficiency of Financial
Markets (graded)
|
Financial
markets operate with varying degrees of efficiency. What are the main ways in
which the efficiency of financial markets and instruments are defined? Which
markets are most efficient? Least efficient? Based on what measures? Why?
Devry
FIN364 Week 2 Discussion DQ 1 & DQ 2
DQ
1
|
Federal Reserve Policy
Objectives (graded)
|
What
objectives does the Fed keep in mind when setting monetary policy? What are the
Fed’s priorities in terms of alternative objectives? Does the Fed always meet
the intended objectives? Take some time and research historic and recent
examples of monetary policy actions on the Internet. Did the Fed always meet
the intended objective? Why or why not? (Once you have found the information,
please be sure to post your source(s) within your response).
DQ
2
|
Monetary Policy Tools
(graded)
|
Let’s
discuss the actual tools of the Fed. What tools does the Fed use to execute
monetary policy, and how do they work in practice? Of the monetary policy tools
available to the Fed, which is preferred? Why?
Devry
FIN364 Week 3 Discussion DQ 1 & DQ 2
DQ
1
|
Loanable Funds and Interest
Rates (graded)
|
Let’s
discuss the relationship between loanable funds and interest rates. What are
the sources of loanable funds in the economy? How does the availability of
loanable funds affect interest rates? What does this imply for the way in which
the Fed manages the money supply?
DQ
2
|
Expectations and Interest
Rates (graded)
|
What is
the role of expectations in interest rate determination? How does expectations
affect real and nominal interest rates? How and why do lenders make interest
rate adjustments? How does this affect borrowers?
Devry
FIN364 Week 4 Discussion DQ 1 & DQ 2
DQ
1
|
Bonds and Bond Duration
(graded)
|
Suppose
you have a goal of starting a new business 3 years from now and must accumulate
enough funds for this project. You decide to invest in bonds, but are concerned
about interest rate risk. How can duration be used to estimate and manage
interest rate risk? How can the duration of a bond portfolio be adjusted? Why
might an institution or investor want to do this?
DQ
2
|
Bond Characteristics and
Behavior (graded)
|
How are
bond prices related to interest rates? What are the impacts of tax treatments;
marketability; and characteristics such as call provisions, put options, and
conversion options on yield? Given your earlier answer, what are the
characteristics of an ideal bond from an investor’s perspective?
Devry
FIN364 Week 5 Discussion DQ 1 & DQ 2
DQ
1
|
Money Market Instruments in
Detail (graded)
|
You are
the CEO of a Fortune 500 company. You have two objectives:
1.
invest $5 million cash on hand short term (overnight to one month); and
2. borrow $100 million for your firm’s working capital needs.
2. borrow $100 million for your firm’s working capital needs.
How
would you achieve both objectives using the money markets? Describe your
alternatives in terms of the characteristics of money markets instruments.
Which of the money market instruments would you choose in each case? Why?
This
section lists options that can be used to view responses.
DQ
2
|
Repos and Repo Transactions
(graded)
|
What are
repos? How popular are they as a money market instrument compared to other
money market options? Under what circumstances does engaging in a repo
transaction makes sense? How important are expectations to the repo
transaction?
Devry
FIN364 Week 6 Discussion DQ 1 & DQ 2
DQ
1
|
Securitizing Debt (graded)
|
What are
the key things to consider when considering securitizing consumer debt such as
auto loans or credit card debt? Should we trust the securitization of other
loans such as mortgage notes? Why are these issues important? What is the role
of guarantees in the securitization process?
DQ
2
|
Using Capital Markets
(graded)
|
Capital
markets can involve both large corporations and investors seeking long term
investment options. Under what circumstances are capital markets appropriate
for use by a large firm raising capital? Which capital markets instruments
would be preferred by such a borrower? Why? And, should investors consider
investing in instruments based in emerging markets? What are the risks?
Devry
FIN364 Week 7 Discussion DQ 1 & DQ 2
DQ
1
|
Agency Debt (graded)
|
How do
agencies such as Fannie Mae and Freddie Mac allow individual mortgage holders
to collectively benefit from the agencies’ access to the capital markets? Does
this access result in lower mortgage rates than would otherwise be the case?
Are consumers able to have greater access to mortgage opportunities? Why or why
not?
DQ
2
|
Mortgages and Mortgage-Backed
Securities (graded)
|
Who are
the typical holders of mortgages and mortgage-backed securities? What
characteristics of mortgage-backed securities make them attractive to these
entities? What entities are involved in the origination of mortgages and the
exchange of mortgage-backed securities, and how can industry conditions impact
these markets?
Devry
FIN364 ALL Week Homework
Devry
FIN364 Week 1 Homework
1.
1. Question : (TCO 1) An SSU’s
income
and expenditures for the period are equal.
income
for the period exceeds expenditures.
expenditures
for the period exceed receipts.
spending
is entirely financed by credit cards.
Question
2. Question : (TCO 1) An
efficient financial system
eliminates
search and transactions costs.
is a
mere theoretical possibility.
promotes
economic growth and social progress.
depends
on high volumes of “direct” transactions.
Question
3. Question : (TCO 1) Which of
the following are economic units?
Households
Businesses
Governments
All of
the above
Points
Received: 3 of 3
Comments:
Question
4. Question : (TCO 1) Profitability
of financial intermediaries derives from all of the following except
government
regulation of interest rates.
economies
of scale.
ability
to manage credit risk.
control
of transactions costs.
Question
5. Question : (TCO 1) Money
market mutual funds are a strong competitor for
depository
institutions.
contractual
savings institutions.
finance
companies.
the real
estate market.
Question
6. Question : (TCO 1) In
direct financing, the lender
trades a
financial claim for money.
trades
money for a financial claim issued by a financial institution.
trades
money with a broker who owns the financial claims of a borrower.
trades
money for the financial claim of the borrower.
Question
7. Question : (TCO 1) ______
merely execute buy or sell orders for their clients; _______ make markets.
Dealers;
brokers
Brokers;
investment bankers
Dealers;
financial institutions
Brokers;
dealers
Question
8. Question : (TCO 1) The only
deposit-type institutions that do not operate for profit are
thrift
institutions.
credit
unions.
pension
funds.
Question
9. Question : (TCO 1) Money
market instruments and capital market instruments differ appreciably in
maturity.
liquidity.
availability
to ordinary individual investors.
All of
the above
Question
10. Question : (TCO 1) The best
synonym for financial intermediation is
direct
finance.
investment
banking.
market
making.
transformation
of claims.
Question
11. Question : (TCO 1) Corporations
list their securities on exchanges in order to
pay an
annual listing fee and disclose important information.
enhance
the liquidity of their securities for investors.
sell
more securities.
increase
the size of the firm.
Question
12. Question : (TCO 1) The
money market is important because
it is
the world’s liquidity market.
it is
the market in which the Fed conducts monetary policy.
the
federal government finances most of its credit needs in the money market.
All of
the above
Question
13. Question : (TCO 1) Federal
Funds are typically
treasury
deposits.
Federal
Reserve assets.
commercial
bank deposits at the Federal Reserve.
Federal
Reserve deposits.
Question
14. Question : (TCO 1) An S
& L taking short-term deposits and financing local land development is
engaging in
speculation.
maturity
intermediation.
denomination
intermediation.
currency
transformation.
Question
15. Question : (TCO 1) Potential
fluctuations in exchange rates and the currency value of one country relative
to another represent
credit
risk.
liquidity
risk.
foreign
exchange risk.
interest
rate risk.
Devry
FIN364 Week 2 Homework
Devry
FIN364 Week 2 Homework Discussion
1.
1. Question : (TCO 2) The asset of Federal Reserve banks
associated with open market operations is
Federal
Reserve notes.
U.S.
government securities.
loans to
member banks.
float.
Question
2. Question : (TCO 2) Federal
Reserve notes held in bank vaults are the liability or obligation of
the Fed.
the
Treasury.
the
bank.
None of
the above
Question
3. Question : (TCO 2) When the
New York Fed sells Treasury securities to a securities dealer,
the
depository institutions deposits in the Fed decrease.
the
depository institutions deposits in the Fed increase.
the
deposit balance of the security dealer in its bank decreases.
both
depository institutions deposits in the Fed decrease and the deposit balance of
the security dealer in its bank decreases above.
Question
4. Question : (TCO 2) The
purchase of government securities by the Fed will
decrease
the money supply.
increase
security prices.
increase
interest rates.
decrease
credit availability.
Question
5. Question : (TCO 2) The
Federal Reserve System established
a system
for federal chartering of banks.
a system
for controlling bank note issuance.
a source
of liquidity for the banking system.
the
beginning of demand deposit accounts.
Question
6. Question : (TCO 2) The
Fed’s most visible monetary tool is probably
open
market operations.
change
in reserve requirements.
Reg Z.
discount
rate policy.
Question
7. Question : (TCO 2) Reserve
requirements apply to
national
banks.
state
banks.
savings-and-loan
associations.
All of
the above
Question
8. Question : (TCO 2) Using
this data, answer the question below:
Total
Reserves $90,000,000
Reserve
Requirement 5%
Total
Deposits $700,000,000
What is
the level of excess reserves?
$
5,000,000
$
55,000,000
$
70,000,000
Not
ascertainable
Question
9. Question : (TCO 3) The
monetary base will decrease when
banks
withdraw currency from the Fed.
the Fed
makes loans at the discount window.
the Fed
sells securities on the open market.
the Fed
buys securities on the open market.
Question
10. Question : (TCO 3) An
increase in the assets of Federal Reserve banks will
decrease
the monetary base.
increase
the monetary base.
has no
effect on monetary base.
always
decrease another Federal Reserve Bank asset.
Question
11. Question : (TCO 3) An
increase in excess reserves will cause
the Fed
Funds rate to rise.
planned
inventory investment to fall.
depository
institutions to lend more freely.
foreign
investors to buy more T-Bills.
Question
12. Question : (TCO 3) Consumption
spending should increase if
financial
wealth decreases.
reserve
requirements decrease.
interest
rates increase.
credit
availability decreases.
Question
13. Question : (TCO 3) If the
money supply increases too rapidly then
inflationary
expectations will rise.
government
spending will decrease.
bank
lending will decrease.
investment
spending will fall.
Question
14. Question : (TCO 3) Monetary
policy probably affects all of the following except
housing
investment.
consumer
durable investment.
inventory
investment.
federal
government budget outlays.
Question
15. Question : (TCO 3) Which of
the following is not a channel of transmission of monetary policy?
Reg Q
interest rate ceilings
Consumer
spending for durable goods and housing
Net
exports
Business
investment in real assets
Devry
FIN364 Week 3 Homework
Devry
FIN364 Week 3 Homework Discussion
Question
1. Question : (TCO 4) Which of
the following factors influence the real rate of interest?
Investor’s
positive time preference
The gold
supply
Return
on capital investments
Both a
and c
Question
2. Question : (TCO 4) Negative
realized real rates of interest are associated with periods where
inflation
forecasts significantly underestimate inflation.
nominal
interest rates were too high relative to actual inflation.
prior
inflation forecasts overestimated inflation.
bond
prices were priced too low relative to actual inflation.
Question
3. Question : (TCO 4) The
demand for loanable funds may shift upward (increase) from
a
decline in the supply of loanable funds.
a
decline in business prospects.
an
improvement in technology.
an
expectation of an upcoming recession.
Question
4. Question : (TCO 4) Which of
the following is best associated with interest rate movements and inflation?
Interest
rates move inversely with inflation.
Interest
rates vary directly with expected inflation.
Interest
rates vary directly with past inflation rates.
Inflation
is impacted by expected interest rates.
Question
5. Question : (TCO 4) Deficit
spending units (DSU) are represented in loanable funds theory as
suppliers
of loanable funds.
demanders
of financial claims.
demanders
of loanable funds.
DSUs are
not represented in the loanable funds theory of interest rate determination.
Question
6. Question : (TCO 4) Which of
the following is more likely to adversely affect long-term bond prices?
A
forecast of lower inflation in the future.
A
forecast of a slower economy next year.
A
forecast of higher inflation in the future.
A
forecast of lower government budget deficits.
Question
7. Question : (TCO 4) Economies
with very high current and expected inflation rates
will
have a significant long-term debt market.
will
have debt instruments with interest rates indexed to the inflation rate.
will
favor long-term financing over short-term.
will
have very low interest rates.
Question
8. Question : (TCO 4) A
decrease in the money stock by the Federal Reserve
shifts
the supply of loanable funds to the left, decreasing interest rates.
shifts
the demand for loanable funds to the left, increasing interest rates.
shifts
the supply of loanable funds to the left, increasing interest rates.
shifts
the supply of loanable funds to the right, increasing interest rates.
Question
9. Question : (TCO 4) The
lower a consumer’s positive time preference for consumption,
the more
savings they will accumulate.
the
lower the level of interest rates.
the
greater the supply of loanable funds.
All of
the above
Question
10. Question : (TCO 4) If the
actual rate of inflation is less than the rate expected during a period,
the
borrowers benefited at the expense of lenders.
the
lenders benefited at the expense of borrowers.
both
borrowers and lenders benefited.
neither
borrowers nor lenders benefited.
Question
11. Question : (TCO 4) An
increase (shift to right) in the supply of loanable funds (SL) may be related
to all but one of the following?
An
increase in the money supply.
An
increase in household thriftiness.
An
increase in household income.
An
increase in personal income taxes.
Question
12. Question : (TCO 4) If the
real rate of interest is 4% and the expected inflation rate was 7%, a loan at
12%
would
reward the lender at the borrower’s expense.
would
reward the borrower at the lender’s expense.
would
penalize the lender at the borrower’s expense.
None of
the above
Question
13. Question : (TCO 4) An
investor received an 8 percent coupon rate last year on a $1000 bond purchased
at par. The inflation rate during the year was 4 percent and is expected to be
5 percent next year. The realized real rate earned by the investor last year
was
8%.
3%.
4%.
-1%.
Question
14. Question : (TCO 4) An
investor earned 11 percent last year, a year when actual inflation was 9
percentand was expected to have been 6 percent. The investor realized real rate
of return was
3%.
2%.
11%.
15%.
Question
15. Question : (TCO 4) With the
real rate at 3 percent, most loans were made at 10 percent last year. This year
interest rates have declined to 8 percent. What was the expected inflation rate
last year?
5%
2%
7%
8%
Devry
FIN364 Week 4 Midterm
1.
1. Question : (TCO 1) Credit unions are _____ institutions.
thrift
contractual
federal
depository
Question
2. Question : (TCO 1) The
household sector is the largest surplus sector and invests in the capital
market ______.
directly
by purchasing stocks and bonds
indirectly
through mutual funds
indirectly
through pension funds
All of
the above
Question
3. Question : (TCO 1) Money
markets are associated with _______ ; capital markets are associated with
______.
liquidity;
marketability
spot;
future
liquidity;
economic investment
primary;
secondary
Question
4. Question : (TCO 1) Secondary
capital markets have promoted economic growth in the United States because
they
have increased marketability of stocks and bonds.
they have
increased the public’s access to investment.
they
have helped investors diversify.
All of
the above
Question
5. Question : (TCO 1) Which of
the following is not a debt security?
Corporate
bonds
U.S.
Government securities
Federal
agency securities
Common
stock
Question
6. Question : (TCO 1) A
conditional contract granting its holder the right to buy assets in the future
is a ______.
put
forward
contract
futures
contract
call
Question
7. Question : (TCO 1) The ease
with which a financial claim can be resold is its ______.
quality
risk
marketability
perpetuity
Question
8. Question : (TCO 2) Who has
a permanent vote on the FOMC?
President
of the Federal Reserve Bank of New York
Federal
Advisory Council
President
of the Federal Reserve Bank of San Francisco
Congress
Question
9. Question : (TCO 2) An
increase in Federal Reserve float
decreases
bank reserve deposits in the Fed.
increases
bank reserve deposits in the Fed.
has no
impact upon bank reserves deposits in the Fed.
reduces
the net loan granted by the Fed to member banks.
Question
10. Question : (TCO 2) If the
Fed wanted to increase the money supply immediately but just slightly, it would
most likely ______.
buy
securities on the open market
lower
the Discount Rate
lower
reserve requirements
Any of
the above would be suitable for this purpose.
Question
11. Question : (TCO 3) Unemployment
should fall if ______.
wages
increase and people expect prices to rise as well
wages
increase and people expect prices to be stable
interest
rates rise more than prices are expected to rise
the
money supply increases
Question
12. Question : (TCO 3) Monetary
policies directed toward increased economic growth may have what impact upon
the value of the dollar in relation to other currencies?
Increase
Decrease
No
effect
None of
the above
Question
13. Question : (TCO 3) The
“tools” of monetary policy, whether “viable” or not, include all the following
except______.
changing
the discount rate
open
market operations
changes
in reserve requirements
changes
in the Federal Funds rate
Question
14. Question : (TCO 3) Monetarists
and Keynesians agree that______.
monetary
policy influences the real sector
changes
in the money supply drive changes in interest rates
changes
in interest rates drive changes in the money supply
monetary
policy does not influence the real sector
Question
15. Question : (TCO 2, 3) Which of
the following was not a responsibility of the early Federal Reserve?
Replace
the National Banking system
Improve
the payments system
Establish
more rigorous bank supervision
Act as
“lender of last resort”
Question
16. Question : (TCO 4) Which of
the following statements about interest rates is incorrect?
Bond
prices and interest rates change inversely with one another.
The
expected rate of inflation affects current market interest rates.
Short-term
interest rates are not as volatile as long-term interest rates.
Interest
rates are directly related to the level of output in the economy.
Question
17. Question : (TCO 4) Interest
rates should increase if
the
economy is in a boom.
inflationary
expectations have decreased.
the
Federal Reserve has decreased M1 and the supply of loanable funds.
inflationary
expectations have increased.
Question
18. Question : (TCO 4) Interest
rates move ______ with expected inflation and _____ with economic activity.
directly;
inversely
inversely;
inversely
directly;
directly
inversely;
directly
Question
19. Question : (TCO 4) If
nominal interest rates are 10% and expected inflation is 5%, ______.
actual
inflation exceeds 10%
the real
rate of interest is 5%
market
rates are expected to increase to 15%
expected
interest rates are 5%
Question
20. Question : (TCO 4) With the
real rate at 5%, most loans were made at 10% last year. This year, interest
rates have declined to 8%. What was the expected inflation rate last year?
5%
2%
10%
8%
1.
1. Question : (TCO 1) List and briefly describe the main
risks managed by financial intermediaries.
Question
2. Question : (TCO 2) Explain
why the Federal Reserve is less “independent” than it appears to be.
Question
3. Question : (TCO 3) What
should happen to consumption if the monetary base increases? Explain.
Question
4. Question : (TCO 4) Explain
why realized real rates of interest are sometimes negative but expected real
rates are always positive. Give an example.
Devry
FIN364 Week 5 Homework
1.
1. Question : (TCO 6) Which of the following is not a
characteristic of money market instruments?
Short
term to maturity
Small
denominations
Low
default risk
High
marketability
Question
2. Question : (TCO 6) Small
investors are likely to invest in the money market _____.
directly
locally
through
banks
indirectly
Question
3. Question : (TCO 6) Which of
the following may be a liability of a non-financial business corporation?
Commercial
paper
Federal
Funds
Treasury
securities
Agency
securities
Question
4. Question : (TCO 6) Which of
the following money market rates is studied closely for indicators of changes
in Federal Reserve monetary policy?
Federal
Funds
Treasury
bills
Commercial
paper
Banker’s
acceptances
Question
5. Question : (TCO 6) Issuers
of commercial paper tend to be
large
financial and nonfinancial firms.
firms
with high credit risk.
small
banks.
wealthy
individuals.
Question
6. Question : (TCO 6) Banks
invest in government securities for a variety of reasons except
income.
safety.
acceptable
for collateral.
high
relative yield.
Question
7. Question : (TCO 6) Which of
the following money market instruments would typically be used in international
transactions?
A
Treasury bill
A
banker’s acceptance
Commercial
paper
A
negotiable CD
Question
8. Question : (TCO 6) An
important economic function of the U.S. government security dealer is to
underwrite
Treasury securities.
“make a
market” for Treasury securities.
support
open market operations of the Federal Reserve.
All of
the above
Question
9. Question : (TCO 6) Which of
the following money market instruments is not sold on a discount basis?
Commercial
paper
Negotiable
certificates of deposit
Treasury
bills
Banker’s
acceptances
Question
10. Question : (TCO 6) Yields
on three-month T-bills are more similar to
Two-year
Treasury notes rates.
90-day
commercial paper rates.
federal
funds rates.
Aaa-rated
corporate bond rates.
Question
11. Question : (TCO 6) A non-competitive bid in the Treasury
securities auction market is characterized by
the
bidder specifying the quantity of bills desired.
the bid
not exceeding a specific dollar amount.
the
bidders paying a price equal to the weighted average price of all competitive
bids accepted.
All of
the above
Question
12. Question : (TCO 6) A
repurchase agreement calls for
a firm
to sell securities with the agreement to buy them back later at a higher price.
a firm
to buy securities with the agreement to sell them back later at a higher price.
a firm
to sell securities with the agreement to buy them back later at a lower price.
a firm
to buy securities with the agreement to sell them back later at a lower price.
Question
13. Question : (TCO 6) The Wall
Street Journal publishes T-bill price (bid/ask) based on the _____ rate; with
the _____ rate provided as the quoted (ask) yield on the T-bill.
bond
equivalent; bank discount
effective
annual; bank discount
bank
discount; bond equivalent
bank
equivalent; bank discount
Question
14. Question : (TCO 6) A firm
buys $1,000,000 of a 30-day commercial paper issue for $995,450. The bond
equivalent yield on this commercial paper is _____.
5.56%
5.46%
5.49%
5.54%
Question
15. Question : (TCO 6) Calculate the bond equivalent yield on a 52-day $1,000,000
T-bill issue selling for 98.555% of its face value.
10.85%
10.75%
10.54%
10.29%
Devry
FIN364 Week 6 Homework
1.
1. Question : (TCO 7) The secondary markets for capital
market securities have facilitated economic growth in the U.S. because
they
help provide marketability for capital market claims.
they
have increased people’s willingness to buy capital market claims.
they
make people more willing to invest because they can more easily diversify their
risk.
All of
the above
Question
2. Question : (TCO 7) A
capital market financing is most likely to finance
new
plant and equipment.
seasonal
inventory needs.
a
quarterly dividend payment.
the sale
of common stock.
Question
3. Question : (TCO 7) You
purchase a Treasury inflation-protected note with an original principal amount
of $1,000,000 and a 2.8 percent annual coupon (paid semiannually). What will
the first coupon payment be if the semiannual inflation over the first six
months is 1.2%?
$14,168
$14,000
$28,336
$28,000
Question
4. Question : (TCO 7) Which of
the following statements about STRIPs is true?
STRIPs
are sold directly by the Treasury Department.
When a
STRIP is created, all interest payments become one security and the principal
payment becomes the other.
Many
small investors prefer STRIPs because they require a lower minimum investment
than original Treasury notes and bonds.
Treasury
securities dealers create STRIPs because they expect to sell the created
zero-coupon securities for more than what they paid for the original Treasury
security.
Question
5. Question : (TCO 7) Most
general obligation bonds are backed by
corporations.
brokers.
the
issuing government.
None of
the above
Question
6. Question : (TCO 7) Corporate
bonds are less marketable than money market instruments and corporate equities
because
they
have special features (e.g., call provisions) that make them difficult to
value.
they are
long-term securities, which tend to be riskier and less marketable.
they
have special features (e.g., call provisions) that make them difficult to value
and they are long-term securities, which tend to be riskier and less
marketable.
corporate
bonds are in fact not less marketable than money market instruments and
corporate equities.
Question
7. Question : (TCO 7) The
demand for junk bonds came primarily from
life
insurance companies.
savings
and loans association.
pension
funds.
All of
the above
Question
8. Question : (TCO 7) The
current exchange rate between U.S. Dollar and Euro is $1.355/.738. It means
that
one Euro
can buy 0.738 Dollars.
one
Dollar can buy 0.738 Euros.
one Euro
can buy 1.355 Dollars.
both one
Dollar can buy 0.738 Euros and one Euro can buy 1.355 Dollars.
Question
9. Question : (TCO 7) A
payment guarantee issued by a commercial bank on behalf of an importer is a
sight
draft.
time
draft.
letter
of credit.
documented
transfer.
Question
10. Question : (TCO 7) Which of
the following is not the reason the Eurocurrency market is an attractive place
to store excess liquidity for corporations, countries, and individuals?
Investors
are allowed to hold debt securities in bearer form
Automatic
withholding of tax on interest earned
Investments
earn higher returns
High
liquidity of Eurocurrency deposits
Devry
FIN364 Week 7 Homework
1.
1. Question : (TCO 8) A contract designed to use the equity
in a home for retirement income without any required payments is called a(n)
_____.
rollover
mortgage
reverse
annuity mortgage
adjustable-rate
mortgage
home
equity loan
Question
2. Question : (TCO 8) State
and local governments make mortgage loans at below-market rates of interest
because
they
want to compete with the thrifts.
they
want to help local thrift institutions.
they can
obtain funds for mortgage financing cheaply by selling tax-exempt securities.
they
lend to lower income, larger home buyers.
Question
3. Question : (TCO 8) Which of
the following is not a reasonable expectation for investors in pass-through
mortgage securities?
The
securities are readily marketable.
They
have little default risk.
The
investor receives cash flows in proportion to his/her ownership proportion.
The
timing of the cash flow return from the securities is quite predictable.
Question
4. Question : (TCO 8) Which of
the following is not used to adjust ARM rates?
Treasury
security rates
Dow
Jones Mortgage Rate Index
S &
L cost of funds index
LIBOR
Question
5. Question : (TCO 8) Which of
the following is not a mortgage-backed security?
A jumbo
mortgage
A Ginnie
Mae pass-through
A
collateralized mortgage obligation
A real
estate mortgage investment conduit (REMIC)
Question
6. Question : (TCO 8) If you
were a manager of a thrift institution and you expected interest rates to
increase, what type of mortgage would you most like to hold?
Balloon
payment, 10 years
Rollover
mortgage, two years
Adjustable-rate
mortgage, monthly
Fixed-rate
mortgage, 15 years
Question
7. Question : (TCO 8) Which of
the following is not associated with tightened mortgage credit standards?
More
time on the current job required.
An
increase in the loan/value ratio.
A
decrease in the maximum total debt payments per month per amount of monthly
income.
Decreased
maximums in the payment/income ratio of borrowers.
Question
8. Question : (TCO 8) Which of the following is not true about
construction-to-permanent mortgages?
Bridge financing
is provided by lender over the time frame required by the borrower to purchase
land and construct the house.
Both
interest and principal payments are made until construction is completed.
Loan is
financed in increments as construction payments have to be made.
On
completion of the construction, loan balance is rolled over into the type of
mortgage contract desired by borrower.
Question
9. Question : (TCO 8) Mortgage
bankers usually do not
permanently
fund mortgages.
originate
mortgages.
service mortgages.
collect
monthly payments from borrowers.
Question
10. Question : (TCO 8) The Tax
Reform Act of 1986 increased the popularity of home equity lines of credit
because
tax
deductibility of interest for homeowners was reduced.
interest
incurred under home equity lines was made tax deductible, but interest on other
household financing was not.
banks
and savings and loans were given tax incentives to make home equity lines of
credit.
the law
reduced the rates charged on home equity loans.
Question
11. Question : (TCO 8) Which of
the following statements is true?
All
fixed-rate mortgages have interest rate caps.
All
adjustable rate mortgages have interest rate caps.
An
interest rate cap on a mortgage reduces the lender’s interest rate risk
exposure.
Usually,
an annual interest rate cap on a mortgage is 5%, and a lifetime cap is 1-2%.
Question
12. Question : (TCO 8) The
original purpose of the Federal Home Loan Mortgage Corporation (Freddie Mac)
was to
make
home loans to low income individuals.
purchase
the conventional mortgages from thrift institutions.
purchase
the insured conventional mortgages from financial institutions.
purchase
the government insured mortgages from thrift institutions.
Question
13. Question : (TCO 8) What is
the monthly payment on a $200,000 conventional fixed-rate mortgage, 9 percent,
financed for 15 years?
$2,028
$1,500
$1,389
$2,067
Question
14. Question : (TCO 8) For a
$200,000 conventional fixed-rate mortgage, 7 percent, financed for 15 years,
what is the loan balance after 10 years if paid as agreed?
$92,721
$83,581
$85,492
$90,785
Question
15. Question : (TCO 8) What is
the monthly payment on a home costing $150,000, 30 percent down, 25 years at 9
percent?
$636.09
$881.16
$763.31
$677.82
devry
fin364 week 7 Research Paper
Effects
of Electronic Transactions and Banking
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