9/5/24, 5:32 Chapter 12 PDF financial markets and
PM institutions
Chapter 12
The Mortgage Markets
1) Which of the following are important ways in which mortgage markets differ from stock and
bond markets?
A) The usual borrowers in capital markets are government entities, whereas the usual
borrowers in mortgage markets are small businesses.
B) The usual borrowers in capital markets are government entities and large businesses,
whereas the usual borrowers in mortgage markets are small businesses.
C) The usual borrowers in capital markets are government entities and large businesses,
whereas the usual borrowers in mortgage markets are small businesses and individuals.
D) The usual borrowers in capital markets are businesses and government entities, whereas
the usual borrowers in mortgage markets are individuals.
Answer: D
2) Which of the following are true of mortgages?
A) A mortgage is a long-term loan secured by real estate.
B) A borrower pays off a mortgage in a combination of principal and interest payments that
result in full payment of the debt by maturity.
C) Over 80 percent of mortgage loans finance residential home purchases.
D) All of the above are true of mortgages.
E) Only A and B of the above are true of mortgages.
Answer: D
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, 9/5/24, 5:32 Chapter 12 PDF financial markets and
PM institutions
3) Which of the following are true of mortgages?
A) Prior to the 1920s, U.S. banking legislation discouraged mortgage lending by banks.
B) In the 1920s, most mortgages were balloon loans, which required the borrower to pay the
entire loan amount after three to five years.
C) Because mortgages are long-term loans secured by real estate, mortgage lenders tended
to fail when land prices declined, as was often the case during economic recessions.
D) All of the above are true.
E) Only A and B of the above are true.
Answer: D
4) Which of the following is true of mortgage interest rates?
A) Interest rates on mortgage loans are determined by three factors: current long-term
market rates, the term of the mortgage, and the number of discount points paid.
B) Mortgage interest rates tend to track along with Treasury bond rates.
C) The interest rate on 15-year mortgages is lower than the rate on 30-year mortgages,
all else the same.
D) All of the above are true.
E) Only A and B of the above are true.
Answer: D
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PM institutions
Chapter 12
The Mortgage Markets
1) Which of the following are important ways in which mortgage markets differ from stock and
bond markets?
A) The usual borrowers in capital markets are government entities, whereas the usual
borrowers in mortgage markets are small businesses.
B) The usual borrowers in capital markets are government entities and large businesses,
whereas the usual borrowers in mortgage markets are small businesses.
C) The usual borrowers in capital markets are government entities and large businesses,
whereas the usual borrowers in mortgage markets are small businesses and individuals.
D) The usual borrowers in capital markets are businesses and government entities, whereas
the usual borrowers in mortgage markets are individuals.
Answer: D
2) Which of the following are true of mortgages?
A) A mortgage is a long-term loan secured by real estate.
B) A borrower pays off a mortgage in a combination of principal and interest payments that
result in full payment of the debt by maturity.
C) Over 80 percent of mortgage loans finance residential home purchases.
D) All of the above are true of mortgages.
E) Only A and B of the above are true of mortgages.
Answer: D
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, 9/5/24, 5:32 Chapter 12 PDF financial markets and
PM institutions
3) Which of the following are true of mortgages?
A) Prior to the 1920s, U.S. banking legislation discouraged mortgage lending by banks.
B) In the 1920s, most mortgages were balloon loans, which required the borrower to pay the
entire loan amount after three to five years.
C) Because mortgages are long-term loans secured by real estate, mortgage lenders tended
to fail when land prices declined, as was often the case during economic recessions.
D) All of the above are true.
E) Only A and B of the above are true.
Answer: D
4) Which of the following is true of mortgage interest rates?
A) Interest rates on mortgage loans are determined by three factors: current long-term
market rates, the term of the mortgage, and the number of discount points paid.
B) Mortgage interest rates tend to track along with Treasury bond rates.
C) The interest rate on 15-year mortgages is lower than the rate on 30-year mortgages,
all else the same.
D) All of the above are true.
E) Only A and B of the above are true.
Answer: D
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