Chapter 11 The Mortgage Markets

Topics: Mortgage loan, Mortgage, Interest Pages: 9 (2487 words) Published: December 5, 2014
Chapter 11 The Mortgage Markets
11.1 Multiple Choice
1) Which of the following are important ways in which mortgage markets differ from the stock and bond markets?
A) The usual borrowers in the capital markets are government entities and businesses, whereas the usual borrowers in the mortgage markets are individuals.
B) Most mortgages are secured by real estate, whereas the majority of capital market borrowing is unsecured.
C) Because mortgages are made for different amounts and different maturities, developing a secondary market has been more difficult.
D) All of the above are important differences.
E) Only (A) and (B) of the above are important differences.
Answer: D
2) Which of the following are important ways in which mortgage markets differ from stock and bond markets?
A) The usual borrowers in capital markets are government entities, whereas the usual borrowers in mortgage markets are small businesses.
B) The usual borrowers in capital markets are government entities and large businesses, whereas the usual borrowers in mortgage markets are small businesses.
C) The usual borrowers in capital markets are government entities and large businesses, whereas the usual borrowers in mortgage markets are small businesses and individuals.
D) The usual borrowers in capital markets are businesses and government entities, whereas the usual borrowers in mortgage markets are individuals. Answer: D
3) Which of the following are true of mortgages?
A) A mortgage is a long-term loan secured by real estate.
B) A borrower pays off a mortgage in a combination of principal and interest payments that result in full payment of the debt by maturity. C) Over 80 percent of mortgage loans finance residential home purchases. D) All of the above are true of mortgages.

E) Only (A) and (B) of the above are true of mortgages.
Answer: D
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4) Which of the following are true of mortgages?
A) A mortgage is a long-term loan secured by real estate.
B) Borrowers pay off mortgages over time in some combination of principal and interest payments that result in full payment of the debt by maturity. C) Less than 65 percent of mortgage loans finance residential home purchases. D) All of the above are true of mortgages.

E) Only (A) and (B) of the above are true of mortgages.
Answer: E
5) Which of the following are true of mortgages?
A) Prior to the 1920s, U.S. banking legislation discouraged mortgage lending by banks.
B) In the 1920s, most mortgages were balloon loans, which required the borrower to pay the entire loan amount after three to five years.
C) Because mortgages are long-term loans secured by real estate, mortgage lenders tended to fail when land prices declined, as was often the case during economic recessions.
D) All of the above are true.
E) Only (A) and (B) of the above are true.
Answer: D
6) Which of the following is true of mortgage interest rates? A) Interest rates on mortgage loans are determined by three factors: current longterm markets rates, the term of the mortgage, and the number of discount points paid.

B) Mortgage interest rates tend to track along with Treasury bond rates. C) The interest rate on 15-year mortgages is lower than the rate on 30-year mortgages, all else the same.
D) All of the above are true.
E) Only (A) and (B) of the above are true.
Answer: D
7) Which of the following are true of mortgages?
A) More than 80 percent of mortgage loans finance residential home purchases. B) The National Banking Act of 1863 rewarded banks that increased mortgage lending.
C) Most mortgages during the 1920s and 1930s were balloon loans. D) All of the above are true.
E) Only (A) and (C) of the above are true.
Answer: E
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8) Which of the following is true of mortgage interest rates? A) Longer-term mortgages have lower interest rates than shorter-term mortgages. B) Mortgage rates are lower than Treasury bond rates, because of the taxdeductibility of mortgage interest rates.

C) In exchange for points,...
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