1. when an accrual bond is created from a CMO tranche, the withheld interest payments can be used to create another class of bond that is normally called a ……………… bond.
2. bank normally do not accept mortgage applications that has:
a. a higher than 80% PTI ratio.
b. a LVT ratio lower than 35%.
c. a PTI ratio that is lower than 35%.
3. the duration measure always:
a. underestimates the new price when yield increases, but overestimates when yield decreases.
b. overestimates the new price when yield increases, but underestimates when yield decreases.
c. overestimates the new price no matter which direction the yield changes.
d. underestimates the old price no matter which direction the yield changes.
4. an illusionary rate offered at the beginning of an ARMs that is less than prevailing mkt. rate, is called the:
a. reference rate.
b. cost of funds index
c. teaser rate
d. toxic rate