15 Questions
What does low yield signify in investments?
Safe and liquid investments
How can an investor reduce risk by diversifying their portfolio?
By investing in a mix of different investments
What is the primary impact of rising market interest rates on a fixed-rate loan?
Increases lender's risk exposure
What is the main goal when a lender charges the borrower more due to additional risk?
To compensate for the extra risk involved
In the context of investments, what does a high yield typically indicate?
High risk and illiquidity
What is the role of the Securities and Exchange Commission (SEC) in securities trading?
Enforcing insider trading rules
How does securitization impact the mortgage industry?
It increases liquidity by selling mortgage-backed securities to investors
What are the three key investment characteristics that investors consider?
Safety, yield, and liquidity
How can an investment be described as 'safe'?
When it carries a low risk of losing money
What does liquidity refer to in investments?
The speed at which an investment can be sold for cash
What can be a consequence of underestimating the risk of a particular investment?
Reduced yield than expected
How do some lenders compensate for the reduced yield due to prepayment?
Charging a prepayment penalty
What impact do high mortgage rates typically have on real estate activity?
Slowdown in real estate activity
Which factor can influence market interest rates charged by lenders?
Loan term
What risk is associated with poor investment decisions resulting from bad judgment?
Risk of loss
Test your knowledge on securities regulation, trading, and the impact of securities trading on mortgage lending. Learn about the role of fund managers in choosing securities, SEC regulations, disclosure of financial information, and enforcement of insider trading rules.
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