Midterm 2.0
Social Security is a?
"pay-as-you-go" system
You have $10,000 to invest and you buy the shares of a load fund that charges a front load of 5.74%. How many shares were you able to buy, if NAV on the purchase day was $9.02?
1,045
Of all commercial banks, about_______ percent belong to the Federal Reserve System?
33
Which of the following protects the mortgage lender's right to sell property if the underlying loan defaults?
A lien
Just prior to the 2007 financial crisis, mortgage loans known as NINJA loans were issued to borrowers. What is a ninja loan?
A loan issued to borrowers with no income, employment, nor assets to speak of.
A loan for borrowers who do not qualify for loans at the usual market rate of interest because of a poor credit rating or because the loan is larger than justified by their income is?
A subprime mortgage
What factors are used in determining a person's FICO score
All of the above
The interest rate borrowers pay on their mortgages is determined by?
All the above
The main use of funds for life insurance companies is?
Bonds
Which of the following best explains the difference between brokers and dealers?
Brokers are pure middlemen; dealers make markets by standing ready to buy and sell at given prices.
The main use of funds for private sector pension funds is?
Common stock
The Federal National Mortgage Association (Fannie Mae)
Does only A and B of the above
Adjustable rate mortgages shift interest rate risk from the borrower to the lender.
False
Private mortgage insurance is a policy that guarantees to pay the lender the balance on the loan, should a default occur
False
Assets on the Fed's balance sheet include
Government securities and discount loans
The primary function of investment banks is to?
Help corporations issue new securities
The majority of mutual fund assets are now owned by?
Individual investors
A term insurance policy provides?
Insurance benefits only
Which of the following is true of mortgage interest rates?
Longer-term mortgages have higher interest rates than shorter-term mortgages
During the early years of an amortizing mortgage loan, the lender applies?
Most of the monthly payment to interest on the loan.
During the last years of an amortizing mortgage loan, the lender applies?
Most of the monthly payment to the outstanding principal balance.
A mutual fund's net assets divided by the number of its own share outstanding is equal to the?
NAV
All________are required to be members of the Fed
Nationally chartered banks
Moral hazard is an important consequence of insurance arrangements because of the existence of insurance.
Provides increased incentives for risk taking.
If the Federal Reserve wants to expand reserves in the banking system, it will?
Purchase government securities.
The process of underwriting a stock or bond issue requires that the investment bank?
Purchase the entire issue at a predetermined price and then resell it in the market.
The discount rate is?
The interest rate on loans from the Fed to a bank
The federal funds rate is?
The interest rate on loans of reserves from one bank to another.
The Federal Reverve Banks are owned by?
The members banks
The most common type of mortgage-backed security is?
The mortgage pass-through, a security that has the borrower's mortgage payments pass through the trustee before being disbursed to the investors.
An employee is fully vested when he/she acquires a non-forfeiable right to pension benefits irrespective of future employment
True
Other things are equal, the higher the down payment, the less likely a borrower is to default.
True
Prior to the 1920s, U.S banking regulations discouraged mortgage lending by banks.
True
Reverse mortgages provide the borrower with a monthly cash inflow
True
Ginnie Mae
insures pass-through certificates
An open market purchase
shifts the supply curve for reserves to the right and causes the federal funds rate to fall