Chapter 8: Loans and Amortization Schedule Exam With Actual Questions And Correctly Defined Answers.
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Course
AMORTIZATION
Institution
AMORTIZATION
Amortize - correct answer pay down debt through payments over time
Amortization Schedule - correct answer table of numbers underlying the balance and payment graphs, namely the loan balance over time and the payment split ...
Amortize - correct answer pay down debt through payments over time
Amortization Schedule - correct answer table of numbers underlying the balance
and payment graphs, namely the loan balance over time and the payment split into interest and
principal
Prepayment Risk - correct answer risk involved with the premature return of
principal on a fixed income security or loan
default - correct answer occurs when borrow fails to make the required payment
amounts or timing by delaying payments
mortgage - correct answer loans used to buy houses, apartments, property, land or
real estate
loan balance - correct answer amount of principal that remains to be paid
retrospective method - correct answer determines a value or balance via
accumulation with a perspective of what has happened in the past
prospective method - correct answer determine a value or balance via discounting
with a perspective of what will happen in the future
roll forward method - correct answer starts with the beginning balance and adds
interest and cash flows affecting the balance
, principal repaid method - correct answer starts with the original principal and
subtracts principal repaid
balloon payment - correct answer when the last payment is larger than the
recurring payment
drop payment - correct answer when the last payment is smaller than the recurring
payment
balloon mortgage - correct answer makes a smaller level payment throughout the
term except the final payment called a balloon payment is larger
two step mortgage - correct answer has a fixed rate for an initial period of time and
then rests once to current market rates as specified by the contract
adjustable rate mortgage - correct answer has a fixed rate for an initial period of
time and then has a floating rate structure for the remainder of the mortgage term
m/n ARM - correct answer ARM that has the fixed rate for the first m years and
then floats, resetting every n years
Primary mortgage market - correct answer market where loans are first created
loans directly from lenders to borrowers
mortgage originator - correct answer original lender such as commercial banks,
credit unions and community banks, and non-banks
private mortgage insurance (PMI) - correct answer insurance required and charged
by the lender to insure against default by the borrower. Lender mortgage insurance is paid by the
borrower and is usually included in the loan rate
underwriting - correct answer process to assess risk, to decide if the loan is
approved and/or a limit on the loan amount, and to determine the loan rate
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