Jack Enters into a Lease with Mary for a Term

question 42

Multiple Choice

Jack enters into a lease with Mary for a term of one year.Before she leased the property,Mary granted a mortgage over the property to the Royal Bank of Canada.Mary does not advise the Royal Bank of Canada of the lease.A month later Mary defaults under the mortgage.Which of the following is true?

• A)The Royal Bank of Canada's title is subject to lease.
• B)The Royal Bank of Canada is bound by the lease and cannot obtain possession.
• C)The Royal Bank of Canada can evict Jack and sell the property.
• D)Jack can continue to observe the terms of the lease.
• E)The Royal Bank of Canada cannot evict Jack and get a new tenant.

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Definitions:

Bond Portfolio Immunization

A strategy to minimize the impact of interest rate fluctuations on the market value of a bond portfolio by matching the portfolio's duration with the investor’s investment horizon.

Price Risk

The risk that the price of a financial asset will fluctuate, affecting the profit or loss of an investment.

Reinvestment Risk

The risk that future proceeds will have to be reinvested at a lower potential interest rate.

Interest Rate Risk

The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between two rates, or in any other interest rate measure.