Question

1. Government involvement in the mortgage markets has had little impact on standards in the
private sector’s activities in the mortgage market.

True

False

2.

Monetary expansion is needed to further feed "overtrading" in a financial bubble.

True

False

3.

Discount brokers began to appear in the 1960’s to help handle institutional trading needs under
the old fixed-commission fee system on Wall Street.

True

False

4.

Which of the following risks are related to mortgage backed securities?
              I.            Contraction Risk
              II.           Interest Rate Risk
              III.          Extension Risk
              IV.         Net Interest Risk
              V.           Financial (payoff order) Risk

		I, II, and V
		I, II, III
		I, II, III, IV, and V
		II, and IV
		I and IV

5.

1. Regarding conventional mortgages, which of the following statements is TRUE?
                 I.            They are supported by federal and/or state government agencies such as the FHA or the
                                VA.
                 II.           Mortgage insurance is handled by private mortgage insurance companies.
                 III.          They tend to require very low down payments by the home buyer (often below the
                               standard down payment level of 5%).
                 VI.         They can often offer mortgage interest rates below market rates.
                 V.           They involve lending/borrowing in the private markets.

   		I, II, and IV
   		II and V
   		II, III, IV, and V
   		II, and IV
   		I and III

Answer 1

Please find below for the details,

1 True because the government’s presence would be limited to insuring or guaranteeing mortgages for underserved borrowers with moderate- or low-income levels.

2 True, - it doesn't seem so, but there is some evidence of overheating in certain pockets of the economy and asset markets. Prudential norms, proper due diligence and pre-emptive policy measures are critical to avert a financial crisis, the consequences of which can be very harsh.

3 False - that trading fees would be set by market competition instead of a fixed price.

4 I, II, III, IV, and V

5 II, III, IV, and V