Questions from Financial Markets

Q: Compute the face value of a 30-year fixed-rate

Compute the face value of a 30-year fixed-rate mortgage with a monthly payment of $1,100, assuming a nominal interest rate of 9%. If the mortgage requires 5% down, what is the maximum house price?

Q: What is a lien, and when is it used in mortgage

What is a lien, and when is it used in mortgage lending?

Q: How can a change in interest rates affect the profitability of financial

How can a change in interest rates affect the profitability of financial institutions?

Q: Consider the bond in the previous question. Calculate the expected price

Consider the bond in the previous question. Calculate the expected price change if interest rates drop to 6.75% using the duration approximation. Calculate the actual price change using discounted cas...

Q: What is the purpose of requiring that a borrower make a down

What is the purpose of requiring that a borrower make a down payment before receiving a loan?

Q: What kind of insurance do lenders usually require of borrowers who have

What kind of insurance do lenders usually require of borrowers who have less than an 80% loan-to-value ratio?

Q: Lenders tend not to be as flexible about the qualifications required of

Lenders tend not to be as flexible about the qualifications required of mortgage customers as they can be for other types of bank loans. Why is this so?

Q: Distinguish between conventional mortgage loans and insured mortgage loans.

Distinguish between conventional mortgage loans and insured mortgage loans.

Q: Interpret what is meant when a lender quotes the terms on a

Interpret what is meant when a lender quotes the terms on a loan as “floating with the T-bill plus 2 with caps of 2 and 6.”

Q: The monthly payments on both graduated-payment loans and growing-

The monthly payments on both graduated-payment loans and growing-equity loans increase over time. Despite this similarity, the two types of loans have different purposes. What is the motivation behind...