Part 1

1.Mortgage Rates and Risk What is the general relationship between mortgage rates and long-term government security rates? Explain how mortgage lenders can be affected by interest rate movements. Also explain how they can insulate against interest rate movements.

2. Secondary Market Compare the secondary market activity for mortgages to the activity for other capital market instruments (such as stocks and bonds). Provide a general explanation for the difference in the activity level.

3. Financing Mortgages What types of financial institution finance residential mortgages? What type of financial institution finances the majority of commercial mortgages?

4. Mortgage-Backed Securities Describe how mortgage-backed securities (MBS) are used.

5. Amortization Use an amortization table (such as www .bloomberg.com/invest/calculators/index.html) that deter- mines the monthly mortgage payment based on a specific interest rate and principal with a 15-year maturity and then for a 30-year maturity. Is the monthly payment for the 15-year maturity twice the amount for the 30-year maturity or less than twice the amount? Explain

Part 2

1. Shareholder Rights Explain the rights of common stockholders that are not available to other individuals.

2. Prospectus and Road Show Explain the use of a prospectus developed before an IPO. Why does a firm do a road show before its IPO? What factors influence the offer price of stock at the time of the IPO?

3. NYSE Explain why stocks traded on the New York Stock Exchange generally exhibit less risk than stocks that are traded on other exchanges.

4. Role of IMFs How have international mutual funds (IMFs) increased the international integration of capital markets among countries?

5. Dividend Yield Over the last year, Calzone Corporation paid a quarterly dividend of $0.10 in each of the four quarters. The current stock price of Calzone Corporation is $39.78. What is the dividend yield for Calzone stock?