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FINA 4201 Midterm exam with correct answers
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FINA 4201 Midterm exam with correct answers
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FINA 4201 Midterm exam with correctanswers
Residential Capital Stack - ANSWERS✔✔ Residential does not generate income
top - bottom = equity, 2nd mortgage junior debt, 1st mortgage senior debt
Commercial Capital Stack - ANSWERS✔✔ Commercial - any income generating properties
top - bottom = common equity, preferred equity, mezzanine, junior debt, senior debt
-The higher on the pole, the higher the risk and potential return
-Senior debt is highest priority
Common Equity - ANSWERS✔✔ Most risky because it is the first money that goes into
project and there's nothing else there
Residential Debt Comes From - ANSWERS✔✔ -banks
-lenders
-brokers
-primary market
-secondary market
-pension funds
-insurance companies
-REITs
Residential Equity Comes From - ANSWERS✔✔ Borrower
, Broker - ANSWERS✔✔ Provides loan but doesn't actually fund it. It is an intermediary
institution.
Primary Mortgage Market - ANSWERS✔✔ Where mortgage originates
Secondary Mortgage Market - ANSWERS✔✔ When mortgage originator sells mortgage to
an institution or an investor
-Helps bank mitigate risk because it allows them to take the mortgage off of their books by
selling it to someone else and they keep the liquidity
-Freddie Mac, Fannie Mae (biggest buyer), FHA, VA
Commercial Sources of Debt - ANSWERS✔✔ -banks
-lenders
-brokers
-pension funds
-insurance companies
-REIT
Commercial Sources of Equity - ANSWERS✔✔ -REIT
-private equity
-bank - REO (real estate owned)
-pension funds - CALPERS
REIT - ANSWERS✔✔ Real Estate Investment Trust
-Mortgage REIT/Debt REIT
-Equity REIT
-Hybrid REIT
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