QUESTION 1
  If you hold a bond, you could have taxable income from this bond even though you received no cash flows from the bond.

True
False

QUESTION 2
  Munis have an active secondary market.
True
False

QUESTION 3
  Rule 144A increased the liquidity of the secondary market for registered securities.
True
False

QUESTION 4
  In 2008, FNMA and GNMA were placed into conservatorship.
True
False

QUESTION 5
  Hybrid ARMs are suitable for borrowers who do not plan on staying in their residence for more than 5 years.
True
False

QUESTION 6
  You would be more likely to borrow through an ARM if you believed that interest rates were going to increase.
True
False

QUESTION 7
  The FHA guarantees mortgage loans to (mostly) lower income households.
True
False

QUESTION 8
  A MBS security issued by FNMA would have a slightly lower yield than a government bond with the same average maturity.
True
False

QUESTION 9
  Because of the uncertainty in future cash flows, ARM rates are generally higher than fixed-rate mortgage rates for the same maturity.
True
False

QUESTION 10
  Your current income is an important component of your FICO score.

True
False

QUESTION 11
  A CMO is a pass-through security.
True
False

QUESTION 12
  Creating a CMO reduces the total amount of risk in a mortgage-backed pool.
True
False

QUESTION 13
  A _____ is a treasury security that has been partitioned into different securities.

Rule 144A bond

IDB bond

revenue bond

STRIP

QUESTION 14
  The contract that defines the legal rights of bond issuers and bondholders is called the

covenant

debenture

encumbrance

indenture

QUESTION 15
  ARMs reduce interest rate risk for
I. the borrower
II. the lender

I only

II only

I and II

Neither

QUESTION 16
  Suppose you have a $1 million, 5% fixed rate mortgage with annual payments and a maturity of 30 years. What is your approximate annual payment?

$60,051

$65,051

$70,051

$75,051

none of the above

QUESTION 17
  Suppose you have a $1 million, 5% fixed rate mortgage with annual payments, a maturity of 30 years and a balloon payment of $750,000. What is your approximate annual payment?

$50,763

$51,763

$52,763

$53,763

none of the above

QUESTION 18
  Suppose your annual income is $50,000 and your lender will allow you to have a mortgage payment that combined with other debt payments and property taxes, which in your case amount to $500 per month, is no more than 33% of your monthly income. If the current 30-year mortgage rate is 5%, approximately how large a mortgage can you qualify for (assuming you have the required cash for the necessary down payment)?

$160,000

$161,000

$162,000

$163,000

none of the above

QUESTION 19
  Which of the following borrowers would be considered subprime. One with a FICO score of

650

675

700

750

none of above

QUESTION 20
  Which of the following purchase mortgages?
I. FNMA
II. FHLMC
III. GNMA

I and II only

I and III only

II and III only

all of the above

none of the above