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Questions and Answers
What is the name of the insurance policy that helps make up any difference in a mortgage loan?
What is the name of the insurance policy that helps make up any difference in a mortgage loan?
Private Mortgage Insurance (PMI)
What does LIBOR stand for?
What does LIBOR stand for?
London Interbank Offered Rate
What kind of mortgage loan has an interest rate that is tied to a market interest rate?
What kind of mortgage loan has an interest rate that is tied to a market interest rate?
Adjustable Rate Mortgage (ARM)
What is the name of a security that is backed by a pool of mortgages?
What is the name of a security that is backed by a pool of mortgages?
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What are the two main purposes of derivatives?
What are the two main purposes of derivatives?
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Which of the following institutions are NOT typically considered an institutional investor?
Which of the following institutions are NOT typically considered an institutional investor?
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What is the name of the process of converting illiquid assets into marketable securities?
What is the name of the process of converting illiquid assets into marketable securities?
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What is the total value of all financial instruments, such as stocks, bonds, and derivatives, called?
What is the total value of all financial instruments, such as stocks, bonds, and derivatives, called?
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What is the name of the process by which financial markets and institutions become increasingly interconnected?
What is the name of the process by which financial markets and institutions become increasingly interconnected?
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What is the primary way in which individuals typically invest in the financial markets?
What is the primary way in which individuals typically invest in the financial markets?
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Eurobonds are underwritten by international banks.
Eurobonds are underwritten by international banks.
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Mortgage interest rates are not considered an important factor in the decision of a borrower.
Mortgage interest rates are not considered an important factor in the decision of a borrower.
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The term 'hedging' refers to the practice of buying and selling financial products with the goal of making a profit.
The term 'hedging' refers to the practice of buying and selling financial products with the goal of making a profit.
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What is the name of a mortgage that allows the lender to share in the appreciation of the property?
What is the name of a mortgage that allows the lender to share in the appreciation of the property?
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What are the major international investment banking firms called?
What are the major international investment banking firms called?
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What are financial tools that derive value from underlying assets like stocks called?
What are financial tools that derive value from underlying assets like stocks called?
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A foreign bond market refers to a bond issued in the local currency of a country.
A foreign bond market refers to a bond issued in the local currency of a country.
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The process of transforming illiquid financial assets into market capital is known as...
The process of transforming illiquid financial assets into market capital is known as...
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What are the main types of mortgage loans?
What are the main types of mortgage loans?
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What are the two main ways of understanding financial markets?
What are the two main ways of understanding financial markets?
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Study Notes
Mortgage Market
- Mortgage: A long-term loan secured by real estate, used by individuals and businesses to finance real estate purchases.
- Mortgage Interest Rates: A key factor in borrower decisions.
- Loan Terms: Mortgage contracts include many legal and financial details.
- Collateral: Real estate is usually required as collateral for mortgage loans.
- Down Payment: Lenders require a down payment to grant a mortgage loan.
- Private Mortgage Insurance (PMI): Insurance to cover potential discrepancies.
- Borrower Qualifications: Lenders evaluate borrower eligibility.
- Conventional Mortgages: Mortgages originated by banks, not guaranteed.
- Insured Mortgages: Mortgages originated by banks, guaranteed.
- Fixed Rate Mortgages: Interest rate and monthly payments remain constant.
- Adjustable Rate Mortgages (ARMs): Interest rate tied to market interest rates.
- Graduated Payment Mortgages (GPMs): Useful for home buyers.
- Growing Equity Mortgages (GEMs): Initial payments remain the same.
- Shared Appreciation Mortgages (SAMs): Lenders lower interest rates.
- Equity Participating Mortgages (EPMs): Outside investor shares in property.
- Second Mortgage: Junior to the original loan.
- Reverse Annuity Mortgages (RAMs): Funds advanced to the home owner.
- Mortgage Lending Institutions: Provide mortgage loans.
- Mortgage-Backed Securities: Securities backed by a pool of mortgages.
- Securitization: Transforming illiquid financial assets into market capital.
- Derivatives: Financial tools deriving value (e.g., stocks).
Derivatives
- Derivatives Two Purposes: Hedging (protecting from price changes) and speculation (making profit from price changes).
- Future Contracts: Agreements for delivery on a specific date.
- Forward Contracts: Agreements for delivery on a specific date (like future contracts).
- Call Options: Right to buy an instrument.
- Foreign Currency Futures: Future contracts for currency exchange.
- Interest Rate Swaps: Contracts to exchange cash flows.
International Financial Markets
- Internationalization of Financial Markets: Process of interconnectedness of financial markets.
- World Stock Markets: Global platforms for stock trading.
- Size of Financial Markets: Overall scale and value of financial transactions.
- Annual Capital Raised: Total money collected by companies.
- Total Value of Financial Instruments: Value of all financial instruments such as stocks, bonds and derivatives.
- Cross Border Measure: Financial asset exchange between countries.
- International Bond Market, Eurobonds, and Eurocurrencies: Crucial for global finance.
- Factors Affecting Increase in Financial Market Activity: Lower inflation, stock and bond market performance, risk management.
- Categories of Investors: Individuals and institutional investors (mutual funds, hedge funds, insurance companies, pension funds, algorithmic funds, banks, foundations, university endowment funds).
International Credit Markets
- Eurocredits: Floating rate bank loans tied to LIBOR.
- Eurobonds Markets: International bonds underwritten internationally.
- Foreign Bond Market: International bonds issued in a certain currency.
Investment Banking
- Types of Investment Banks:
- Bulge Bracket Banks: Major international banks.
- Middle Market Banks: Banks between smaller regional and large bulge bracket banks.
- Boutique Banks: Small banks focusing on specific deals.
- Regional Boutique Banks: Small regionally focused banks.
- Elite Boutique Banks: Small banks with a specific range of investment banking services.
- Investment Banking Areas of Business: Brokerage, Corporate Advising.
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Description
Dive into the complexities of the mortgage market with this quiz. It covers fundamental concepts including mortgage types, interest rates, loan terms, and borrower qualifications. Perfect for anyone looking to enhance their understanding of real estate financing.
