16.

Interest rate parity

Select one:

a. is the condition when interest rates have adjusted so that rates between countries differ only by the expected appreciation or depreciation of the currency.

b. exists when the interest rates between two countries are equal after accounting for differences in risk.

c. exists when the demand for and the supply of a foreign currency is in equilibrium.

d. None of the above

17.

When interest rates fall, a fixed interest rate mortgage lender will experience the following except

Select one:

a. the value of fixed mortgages will increase as a result of the fall in interest rate.

b. the value of the fixed mortgages will decline as a result of the fall in interest rate.

c. the mortgages may be repaid earlier and the lender may have to reinvest the proceeds at a much lower rare.

d. a negative cash flow may result if long-term mortgages are funded with short-term deposits.

18.

Mortgages are

Select one:

a. loans made to individuals or businesses secured by real estate.

b. securities backed by financial assets.

c. bonds issued by corporations and government.

d. long-term loans to finance business operations.

19.

Mortgages are ____ to the issuer (borrower) and ____ to the holder (lender).

Select one:

a. assets, liabilities

b. collateral, investment

c. investment, collateral

d. liabilities, assets

20.

____ risk is the risk that interest rates rise and the value of long term mortgages decline.

Select one:

a. Interest rate

b. None of the above

c. Default

d. Prepayment

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Please answer ALL correctly!

I will THUMB UP :)