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Which of the following statements regarding a 30-year monthly 


1.	Which of the following statements regarding a 15-year (180-month) $125,000, fixed-rate mortgage is CORRECT?  (Ignore taxes and transactions costs.)

a.	The remaining balance after three years will be $125,000 less one third of the interest paid during the first three years.
b.	Because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant.
c.	Interest payments on the mortgage will increase steadily over time, but the total amount of each payment will remain constant.
d.	The proportion of the monthly payment that goes towards repayment of principal will be lower 10 years from now than it will be the first year.
e.	The outstanding balance declines at a slower rate in the later years of the loan- life.
	
2.	Which of the following statements regarding a 15-year (180-month) $125,000, fixed-rate mortgage is CORRECT?  (Ignore taxes and transactions costs.)

a.	The remaining balance after three years will be $125,000 less one third of the interest paid during the first three years.
b.	Because the outstanding balance declines over time, the monthly payments will also decline over time.
c.	Interest payments on the mortgage will increase steadily over time, but the total amount of each payment will remain constant.
d.	The proportion of the monthly payment that goes towards repayment of principal will be lower 10 years from now than it will be the first year.
e.	The outstanding balance declines at a faster rate in the later years of the loan- life.
	
3.	Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

a.	The monthly payments will decline over time.
b.	A smaller proportion of the last monthly payment will be interest, and a larger proportion will be principal, than for the first monthly payment.
c.	The total dollar amount of principal being paid off each month gets smaller as the loan approaches maturity.
d.	The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
e.	Exactly 10% of the first monthly payment represents interest.
	
4.	Which of the following statements regarding a 30-year monthly payment amortized mortgage with a nominal interest rate of 10% is CORRECT?

a.	The monthly payments will increase over time .
b.	A larger proportion of the first monthly payment will be interest, and a smaller proportion will be principal, than for the last monthly payment.
c.	The total dollar amount of interest being paid off each month gets larger as the loan approaches maturity.
d.	The amount representing interest in the first payment would be higher if the nominal interest rate were 7% rather than 10%.
e.	Exactly 10% of the first monthly payment represents interest.
	
5.	A U.S. Treasury bond will pay a lump sum of $1,000 exactly 3 years from today.  The nominal interest rate is 6%, semiannual compounding.  Which of the following statements is CORRECT?

a.	The periodic interest rate is greater than 3%.
b.	The periodic rate is less than 3%.
c.	The present value would be greater if the lump sum were discounted back for more periods.
d.	The present value of the $1,000 would be smaller if interest were compounded monthly rather than semiannually.
e.	The PV of the $1,000 lump sum has a higher present value than the PV of a 3-year, $333.33 ordinary annuity.




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