Default risk is generally much greater for commercial mortgage loans than home loans because...

Q: Consider two loans that are otherwise identical, except that Loan A has a higher chance of borrower…

A: Loans in finance are one of those credit instruments where some money is lent to the other party and…

Q: Which of the following is the worst measure of the cost of debt? Estimating Interest Rate based on…

A: The cost of debt is the effective return that a company pays for its debt to its debtholders. It is…

Q: Explain Second Mortgages and Shorter Maturities?

A: It is a type of mortgage loan which is similar to a mortgage loan which is tenable by a borrower's…

Q: The advantage of a "balloon payment" loan over a conventional loan  repayment plan is:   A. less…

A: Balloon payment is referred as a large lump-sum payment, which is made at the end of the loan period…

Q: Equity financing is the borrowed funds from outside sources like loans, bonds and mortgages. True or…

A: Corporate finance is referred as the decision of the firm to take capital investments and other…

Q: If a mortgage is the price of a mortgage, can you explain the rise in mortgage prices using basic…

A: INTRODUCTION Yes, you can.If a mortgage is the price of a mortgage, then, in general, the more…

Q: What is the difference between an investment - grade bond and a junk bond?  2 .  What are the…

A: The primary difference between an investment grade bond and a junk bond lies in the credit quality…

Q: Explain Mortgage passthrough securities (MPTs)?

A: Answer: One form of mortgage backed securities is a pass through security. Mortgage securities allow…

Q: You have a choice among three types of loan (discount loan, interest - only loan, and amortized…

A: The objective of the question is to determine whether an amortized loan is the least expensive cost…

Q: It is well recognized that banks are quick to increase base loan rates and quick to lower base loan…

A: Bank loan: Bank loan can be defined as the amount of money borrowed from the banking institutions.…

Q: Because banks accept short term fixed rate deposits they prefer to give loans where loan rate floats…

A: Fixed interest rates are 1%-2.5% higher than the floating interest rate. The increase and decrease…

Q: balloon-payment mortgage. Why might a financial institution prefer to offer this type of mortgage?

A: Step 1 A balloon payment is a one-time payment that is bigger than usual at the expiration of the…

Q: in layman's terms, what is the diff. between a mortgage backed security and a credit default swap?

A: The borrowings made for purchasing fixed-assets like land, property, home and apartments is…

Q: Which is true of variable rate loans? A) the rate can only go up B) the interest rate can go up or…

A: Variable rate loans, also known as adjustable-rate loans, have interest rates that can fluctuate…

Q: interest rate risk differs between mortgage companies and other financial institutions

A: The mortgage company is a financial firm that gives out its own loans. They use their own funds or…

Q: Most lenders do not require collateral for short-term financing.; True or False

A: Collateral refers to something that is pledged in order to repay a loan and which can be forfeited…

Q: The internal rate of return on a mortgage loan calculated from the lender's perspective is more…

A: Discount point is the amount or a part of mortgage amount which the borrower pay at the time of…

Q: Explain why it's possible for tranching to make invest ing in a mortgage -backed security more risky…

A: A mortgage-backed security is a type of security which is backed up by mortgage meaning failing to…

Q: 4. In the lending operations, how many types of loan security? Which one is most p

A: Solution: Introduction: In finance, a loan is a borrowing amount lending(given) by one or more…

Q: Loans Loan Expected Standard Amount Return Deviation A $ 15 8.1% 1.1% million В $ 15 9.2% 1.3%…

A: The following solution is given below:

Q: Which of the following statements regarding fixed-rate loans is true?   Group of answer choices a.…

A: Fixed rate loans are loans which have a fixed rate of interest.

Q: a. Bank loans are classified as investment-grade and leveraged bank loans. Explain the difference…

A: (a) Bank Loan extended to corporate borrowers can be segregated into two categories viz.…

Q: Banks can hedge the credit risk of their mortgage loans by buying credit default swaps. (Think about…

A: The risk or uncertainty that is present in an investment transaction that the investee will not…

Q: How does high interest rate and setting ceiling on loans (limited credit) compensate for the…

A: Rate of interest is selected as per the credit-score of the borrower compared to the range set by…

Q: Three mutually exclusive design alternatives are being considered. The estimated sales and cost data…

A: AW or Annual Worth of project shows equivalent annual benefits that will be generated from project…

Q: Increasing the number of payments on a mortgage loan always decreases the payment amount, all other…

A: When considering the impact of changing the number of payments on a mortgage loan, it is important…

Q: nd 2 are identical, except that Bond 2 has credit enhancement. Issuer of E 1. Which of the following…

A: Credit risk is issuer's inability or failure to repay the debt obligations.

Q: Explain Negative Amortizing, Constant Payment Mortgage (CPM) Loans?

A: Negative amortizing: Negative amortization is a financial concept that refers to a rise in a…

Q: Explain the difference between conventional mortgages, reverse mortgages, and second mortgages.

A: Difference between Conventional mortgage ,reverse mortgage , second mortgage Mortgage Mortgage is a…

Q: Which of the following situations are likely to result in higher loan defaults?     Mortgages…

A: Loan default implies that borrower is not able to repay debt according to initial predetermined…

Q: What aspect of FHA loans made them particularly attractive to investment companies such as life…

A: FHA loans can be referred as the loans that are ussually required lesser financial obligations and…

Q: What went wrong with Subprime mortgages?

A: Mortgage is the value which is offered by banks and other institutions to the public of firms…

Q: What is MOST TRUE of DEFAULT RISK on a mortgage loan? It is always lower with lower interest rates.…

A: Default risk is the risk that a lender assumes when a borrower fails to make mandatory debt…

Q: Interest costs for short-term debt are generally lower than interest costs for long-term debt…

A: Companies and people use debt to tide over liquidity problems or to get access to funds to buy…

Q: Explain the reason why the wraparound lender should be willing to make the loan at a rate that is…

A: Wraparound mortgage is a type of secondary financing in which the seller extends an additional…

Q: Explain why adjustable rate mortgages (ARMs) are considered to be a more suitable alternative for…

A: Adjustable rate mortgages : Also referred to as variable rate or floating rate mortgages, an…

Q: Why is the yield of bonds with credit risk higher than that of otherwise identical default-free…

A: The question is based on the concept of calculation of yield to maturity in bond investment , the…

Q: Why might a wraparound lender provide a wraparound loan at a lower rate than a new first mortgage?

A: Introduction: Wraparound mortgage is a type of loan in which loans are given to borrowers, who is…

Q: Compare and contrast adjustable-rate mortgages (ARMs) to Growth Equity Mortgage (GEM). What are the…

A: GEM and ARM are the types of mortgage options that are available to the borrower. They are different…

Q: Credit risk is a factor for commercial mortgage-backed securities because they are backed by…

A: Option A. Non Recourse Commercial Mortgage backed securities are securities whose payoff depends on…