Question

38) If a savings and loan (S & L) has a very low net worth position, most likely the S & L would

A. invest in conventional fixed-rate loans.

B. invest in variable-rate loans.

C. make and sell eligible loans to the FHLMC.

D. make equity-participation mortgages.

39) The _____ sector is the largest sector of the capital debt market.

A. corporate bonds

B. mortgages

C. state and municipal bonds

D. U.S. Treasury debt

40) Mortgages with private mortgage or government insurance

A. are likely to sell at lower prices and lower rates than comparable conventional mortgages.

B. are less likely to default than conventional mortgages.

C. offer the investor less default risk than conventional mortgages.

D. will be written under the credit standards of the originator, and not the standards of the agency or insurance company.

Answer 1

38) Option C .  

make and sell eligible loans to the FHLMC.

FHLMC Federal home loan and mortgage corp is a government backed mortgage loan and offers very low interest rate, hence offers low net worth to a savings and loan account.

39) Option B .   Mortgages

Mortgage sector is the largest sector of the capital debt market followed by corporate and U.S treasury debt

40) Option C.   offer the investor less default risk than conventional mortgages

Private mortgage insurance offers the the insurers the protection from default risk and provides mortgage financing at an affordable rate for those who cannot provide down payment. Similarly, government backed mortgage insurance are offered by Federal bank and has very low default risk.