FI436 Test 1
If you deposit $1,000 in an account that earns 5% per year, compounded annually, you will have $1,276 at the end of 5 years. What would be the balance in the account at the end of 5 years if interest compounds monthly?
$1,283
A borrower obtains a $150,000 reverse mortgage with monthly payments over 10 years. If the interest rate of the mortgage loan is 8%, what is the monthly payment received by the borrower? - 1,250 - 863 - 820 - 1,820
$1,820
Three physical characteristics of real estate:
- Immobility - indestructibility - non- homogeneity
test for fixture status include:
- attachment - intention to the parties - purpose of which it is to be used
5 years ago, you put $195,108 into an interest-earning account. Today it is worth $227,859. What is the effective annual interest earned on the account? Round your answer to the nearest tenth of a percent. For example, if you get 15.1%, write 0.151
0.032
8 years ago, you put $174475 into an interest-earning account. Today it is worth $295431. What is the effective annual interest earned on the account? Round your answer to the nearest tenth of a percent. For example, if you get 15.1%, write 0.151
0.06804
3 years ago, you put $133,714 into an interest-earning account. Today it is worth $253,115. What is the effective annual interest earned on the account? Round your answer to the nearest tenth of a percent. For example, if you get 15.1%, write 0.151.
0.237
A borrower takes out a 30-year mortgage loan for $141,340 with an interest rate of 14% and monthly payments. What portion (dollar amount) of the first month's payment would be applied to interest?
1,648.97
A mortgage is the same thing as a note. T or F
false
Inflation makes very little difference to lenders of and investors needing money.
false
what is fixity?
improvements cannot easily be moved or altered
"land" is land _________
in its raw state
even moving soil or destroying improvements cannot destroy land in its legal sense
indestructibility
What is real estate?
land and its attachments
Which of the following documents conveys title to a property at the time the purchaser completes the performance of the obligation called for in the document? - land contract - package mortgage - junior mortgage - purchase-money mortgage
land contract
Points are also known as: Reduction of mortgage yield reduction in payment amount third party charges loan discount fees
loan discount fees
The future value of a single deposit of $1,000 will be greater when this amount is compounded: - semi annually - annually - monthly - quarterly
monthly
- each parcel of land can be different with regard to physical characteristics - each parcel of land is unique because of its location
non-homogeneity
Someone had a 25-year mortgage loan for $476,410 with an interest rate of 8% and monthly payments. If she wants to pay off the loan after 9 years, what would be the outstanding loan balance?
397,546.77
A borrower takes out a 15-year mortgage loan for $100,000 with an interest rate of 5% plus 3 points. What is the effective annual interest rate on the loan if the loan is carried for 7 years?
5.4%
A borrower takes out a 15-year mortgage loan for $100,000 with an interest rate of 5% plus 3 points. What is the effective annual interest rate on the loan if the loan is carried for all 15 years? - 5.9% - 5.5% - 5.0% - 6.2%
5.5%
Your friend just won the lottery. He has a choice of receiving $113,114 a year for the next 6 years or a lump sum today. The lottery uses a 9% discount rate. What would be the lump sum your friend would receive?
507,420.20 Enter PMT, I/Y, N CPT PV
A property is encumbered as follows: First mortgage A, 416,716Second mortgage B, 79,273Third mortgage C, 16,522How much can mortgagee C pay for the property at a foreclosure sale without having to raise additional funds?
512,511
A property is encumbered as follows: First mortgage A: 441,433 Second mortgage B: 81,910 Third mortgage C: 14,512 How much can mortgagee B pay for the property at a foreclosure sale with having to raise additional funds?
523,343
A borrower has a 4-year car loan for $16,366 with an interest rate of 5% and monthly payments. If she wants to pay off the loan after 2 years, what would be the outstanding balance on the loan?
8590.96
You deposit $407,630 in an account that earns 8% per year, compounded annually. What would be the balance in the account at the end of 10 years?
880,042.7
You deposit $202,155 in an account that earns 6% per year, compounded annually. What would be the balance in the account at the end of 26 years?
919,680.51
Your friend just won the lottery. He has a choice of receiving $258,258 a year for the next 6 years or a lump sum today. The lottery uses a 17% discount rate. What would be the lump sum your friend would receive?
926,935.68
Which of the following is not a basic component of any compounding problem? - An initial deposit - A net present value - A period of time - An interest rate
A net present value
What type of estate lasts for an indefinite period of time? - estate for years - estate from year to year - freehold estate - leasehold estate
Freehold Estate
Which type of deed offers the grantee the MOST protection? - Quitclaim deed - Officer's deed - General warranty deed - Special warranty deed
General Warranty Deed
What term BEST describes a person that owns a property and is conveying title to the property to another person? - Mortgagor - Mortgagee - Grantee - Grantor
Grantor
cannot be moved from one location to another:
Immobility
A mortgage is BEST defined as a legal document that: - Defines a possessory interest in real estate - Creates an obligation to repay a loan under specific terms - Names real estate as the security or collateral for the repayment of a loan - Conveys ownership of a property to its purchaser
Names real estate as the security or collateral for the repayment of a loan
A borrower takes out a 30-year loan for $294,957 with an interest rate of 9% and monthly payments. What portion (dollar amount) of the first month's payment would be applied to interest?
2212.18
Assuming all APRs equal, the effective interest rate on a loan is highest when: Points are charged and the loan is paid off at maturity in 30 years The loan has no points and is prepaid at maturity Points are charged and the loan has a 30 year maturity but prepaid in five years The loan has no points and a 30 year maturity and is prepaid in five years
Points are charged and the loan has a 30 year maturity but prepaid in five years
What is personal property?
Rights or interests in temporary or moveable items not permanently attached to real estate
a "short sale" of real estate is: - the sale of a house by someone who is not the owner; it is a way to profit from an anticipated decline in real estate prices - a sale in which the proceeds from the sale are less than the balance owed on the loan secured by the property sold - a sale in which the balance owed on the loan secured by the property sold is less than the proceeds from the sale - a sale that closes in less than 30 days
a sale in which the proceeds from the sale are less than the balance owed on the loan secured by the property sold
What is real property?
all interests, benefits, and rights inherent in the ownership of physical real estate (Real Estate + Bundle of Rights)
what is a fixture
an item that was once personal property and now is considered real estate because it is attached to land or improvements in rather permanent manner
At the end of 8 years, your friend wants to have $50,000 saved for a down payment on a house. He expects to earn 8% — compounded monthly — on his investments over the next 8 years. How much would your friend have to put in his investment account each month to reach his goal? a: 392 b: 374 c: 521 d: 188
b: 374
improvements ON the land include:
buildings, parking areas, fences, utilities, sewer mains, etc.
What are linkage modifications?
changes in environment
which of the following types of bankruptcy is available to businesses to reorganize and rehabilitate the debtor? - chapter 13 - chapter 11 - chapter 7 - chapter 17
chapter 11
which of the following types of bankruptcy is filed with the end result of liquidating the debtor's assets? - chapter 17 - chapter 11 - chapter 7 - chapter 14
chapter 7
improvements on the land and improvements to the land are known collectively as:
on-site improvements
which of the following solutions is least likely to be acceptable to a mortgagee when discussing alternatives to foreclosing a property? - providing a temporary grace period during which principal and interest are not paid - permanently extending the amortization period - permanently reducing the interest rate - finding someone else to assume the mortgage
permanently reducing the interest rate
What is situs?
physical location for legal issues
which of the following is not a minimum mortgage requirement? - prepayment clause - covenant of seizing - description of the property - covenant of warranty
prepayment clause
which of the following is not an alternative to foreclosure? - transfer of the mortgage to a new owner - redemption - restructuring the mortgage loan - prepackaged bankruptcy
redemption
A "site" is land ___________
that has been made ready for development
As compared to other types of deeds, a general warranty deed provides the most comprehensive warranties about the quality of the title to the property.
true
It is a federal law that a mortgage must be recorded to be valid. T or F
False
A borrower takes out a 30-year mortgage loan for $369,483 with an interest rate of 7% and monthly payments. What portion (dollar amount) of the first month's payment would be applied to interest?
2,155.32
Your friend just won the lottery. He has a choice of receiving $254048 a year for the next 29 years or a lump sum today. The lottery uses a 11% discount rate. What would be the lump sum your friend would receive?
2,197,543.08
A borrower takes out a 17-year mortgage loan for $409,214 with an interest rate of 5%. What would the monthly payment be?
2,981.76
A borrower has a 20-year mortgage loan for $279,529 with an interest rate of 9% and monthly payments. If she wants to pay off the loan after 9 years, what would be the outstanding balance on the loan?
210,269.72
A(n) ________ estate represents the most complete form of ownership of real estate; the owner is free to divide it up into lesser estates and sell, lease, or borrow against them as he or she wishes. Life Fee simple Leasehold Freehold
Fee Simple
If you deposit $476090 in an account that earns 4% per year, compounded annually. What would be the balance in the account at the end of 47 years?
3,007,848.84
A borrower takes out a 19-year mortgage loan for $425,337 with an interest rate of 8%. What would the monthly payment be?
3,634.51
If an investment earns 12% annually: - An equivalent monthly investment would have to earn a higher equivalent nominal rate to yield the same return - An equivalent monthly investment would have to earn a lower equivalent nominal rate to yield the same return - An equivalent monthly investment would have to earn the same equivalent nominal rate to yield the same return - A relation cannot be determined between a monthly and annual investment
An equivalent monthly investment would have to earn a lower equivalent nominal rate to yield the same return
After a house is purchased, contractors cannot ask the new owner of the house to pay any bills that were outstanding before the house was sold. T or F
False
A historical summary of the publicly-recorded documents that affect the ownership of a property is know as a(n): - Estate - Abstract of title - Lien - Deed
Abstract of title
The Acceleration Clause says notice of all, but which of the following must be given to the mortgager? Default Action required to cure default Time by which default must be cured Acceleration of debt secured by the mortgage has taken place because of default
Acceleration of debt secured by the mortgage has taken place because of default
A reversion and a remainder are similar in that Neither is considered a future estate Both can be sold or mortgaged Both cause the property to go back to the grantor after the sale Neither is an actual interest in the property
Both can be sold or mortgaged
a reversion and a remainder are similar in that: - Neither is considered a future estate - Neither is an actual interest in the property - Both can be sold or mortgaged - Both cause the property to go back to the grantor after the sale
Both can be sold or mortgaged
The internal rate of return: - Is also known as the investment of investor's yield - Represents a return on investment expressed as a compound rate of interest - Is calculated by setting the price of an investment equal to the stream of cash flows it generates and solve for the interest rate - Can be defined by all of the above
Can be defined by all of the above
improvements TO the land include:
Clearing, leveling, drainage, grading, etc.
A clause that specifies that the mortgagor will pay all property taxes and other charges assessed against the property, even if theses charges have priority over the mortgage, is typically included in a mortgage. T or F
True
A clause which specifies that the mortgagee will obtain and maintain property insurance is typically included in a mortgage. T or F
True
A free simple estate is a type of free hold estate. T or F
True
A free simple estate is a type of freehold estate T or F
True
Lenders and investors worry about default, interest rate, marketability, and liquidity risks. T or F
True
Real estate refers to the physical land and improvements constructed on the land. T or F
True
Real estate refers to the physical land and improvements constructed on the land. T or F
True
Real property refers to the ownership rights associated with real estate. T or F
True
Unless stated otherwise, the borrower is personally liable for payment of all amounts due under the terms of the note. T or F
True
