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Lenders take all the interest rate risk

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Reference no: EM131962446

1. Which of the following is the same synthetic position as short stock, long call?

M a. Short put M b. Long call M c. Short call M d. Long put

2. Which of the following is False?

a. For CPM loans, lenders take all the interest rate risk.

b. For CAM loans, lenders take all the interest rate risk.

c. For reserve mortgage loans, borrowers take all the interest rate risk.

d. For PLAM loans, lenders and borrowers share the interest rate risk.

3. Which of the following is TRUE?

a. Negative amortization reduces the principal balance of a loan.

b. On the day of origination, the initial interest rate and expected yield for all ARMs should be the same as that of a FRM.

c. Discount points decrease the lender's effective loan yield.

d. If the inflation is expected to increase, the increase in payments for a PLAM loan continues over the life of the loan even though loan amortization begins to occur as the number of remaining years to maturity declines.

Reference no: EM131962446

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