Those question I got the answer(below) I just need the process and explain how to get the answer.Thanks

1 Which of the following descriptions most accurately reflects the risk position of an ARM lender in comparison to that of a FRM lender? (D)

Interest Rate Risk Default Risk

(A) Higher Higher

(B) Lower Lower

(C) Higher Lower

(D) Lower Higher

	LOAN 1	LOAN 2	LOAN 3	LOAN 4
Initial Interest Rate	?	?	?	?
Loan Maturity (years)	20	20	20	20
% Margin Above Index	3%	---	3%	3%
Adjustment Interval	1 yr.	---	1 yr.	1 yr.
Points	1%	1%	1%	1%
Interest Rate Cap	NONE	----	1%/yr.	3%/yr.

Which loan in the above table should have the lowest initial interest rate? (A)

(A) Loan 1

(B) Loan 2

(C) Loan 3

(D) Loan 4

Which loan in the above table is a FRM? (B)

(A) Loan 1

(B) Loan 2

(C) Loan 3

(D) Loan 4

With which loan in the above table does the lender have the lowest interest rate risk? (A)

(A) Loan 1

(B) Loan 2

(C) Loan 3

(D) Loan 4

Under which scenario is negative amortization likely to occur? (C)

Payment Cap Interest Rates

(A) None Increasing

(B) None Decreasing

(C) 7.5% Increasing

(D) 7.5% Decreasing

A borrower has secured a 30 year, $150,000 loan at 7% with monthly payments.Fifteen years later, an investor wants to purchase the loan from the lender.If market interest rates are 5%, what would the investor be willing to pay for the loan? (C)

$75,000

$111,028

$118,478

$168,646

Assume that houses in an area appreciate at the rate of 4 percent a year. A borrower expects to have a loan-to-value ratio of 90 percent. What would be the approximate expected appreciation rate on home equity (EAHE)? (E)

4.0%

4.4%

10%

20%

40%

A property is purchased for $200,000 with an 80 percent LTV. After five years, the owner