REE 4204 EXAM QUESTIONS WITH
COMPLETE SOLUTIONS
What is the stable growth period? - Answer-1950's, a lot of people working, houses
were being built. the interstate system was created the move personnel and equipment
incase of a domestic war.
Why was increasing inflation, starting in the 1960's, a problem? - Answer-it affected the
short term interest rates, earning 8%, paying 12%, caused mismatched maturities
What occurrences made the 1980's distinctive? - Answer-we were over built. appraisers
over appraised houses so the buyers would make a deal. inflation rates went down, and
interest rates went down
how would you describe the 1990's? - Answer-upscale houses built, not many first time
home built
Why is the 2000's decade described as a period of extremes? - Answer-the housing
market craze- people invested in real estate because it wasn't as risky as the stock
market, growth of secondary mortgage market, rapid increase in house prices because
people were buying a lot of homes, rapid decrease in house prices.
Why is a fixed rate mortgage called fixed? - Answer-the interest rate is fixed (contract
rate)
What are the 3 variables needed to calculate a mortgage payment? - Answer-contract
rate, term, loan amount
What does amortization mean? - Answer-it pays off the loan amount down to zero over
time
What factors help set the contract rate that you are charged? - Answer-your credit
score, market rate
What is APR? - Answer-annual percentage rate, it is an effective cost calculation,
lenders are required to give it to you, APR assumes you hold the mortgage for the full
term
Why do interest rates matter? - Answer-you want to pay the lowest rate you can
because interest determines the payment you have.
How are interest rates determined? - Answer-real rate + inflation rate = interest rate
COMPLETE SOLUTIONS
What is the stable growth period? - Answer-1950's, a lot of people working, houses
were being built. the interstate system was created the move personnel and equipment
incase of a domestic war.
Why was increasing inflation, starting in the 1960's, a problem? - Answer-it affected the
short term interest rates, earning 8%, paying 12%, caused mismatched maturities
What occurrences made the 1980's distinctive? - Answer-we were over built. appraisers
over appraised houses so the buyers would make a deal. inflation rates went down, and
interest rates went down
how would you describe the 1990's? - Answer-upscale houses built, not many first time
home built
Why is the 2000's decade described as a period of extremes? - Answer-the housing
market craze- people invested in real estate because it wasn't as risky as the stock
market, growth of secondary mortgage market, rapid increase in house prices because
people were buying a lot of homes, rapid decrease in house prices.
Why is a fixed rate mortgage called fixed? - Answer-the interest rate is fixed (contract
rate)
What are the 3 variables needed to calculate a mortgage payment? - Answer-contract
rate, term, loan amount
What does amortization mean? - Answer-it pays off the loan amount down to zero over
time
What factors help set the contract rate that you are charged? - Answer-your credit
score, market rate
What is APR? - Answer-annual percentage rate, it is an effective cost calculation,
lenders are required to give it to you, APR assumes you hold the mortgage for the full
term
Why do interest rates matter? - Answer-you want to pay the lowest rate you can
because interest determines the payment you have.
How are interest rates determined? - Answer-real rate + inflation rate = interest rate
