Which of the Following Is a Correct Statement Regarding Residential

question 96

Multiple Choice

Which of the following is a correct statement regarding residential mortgages?

• A) Lenders are no longer allowed to pay mortgage brokers a commission based on the interest rate for a home loan.
• B) The Dodd-Frank Act would require borrowers to pay a portion of the closing cost up front and include the rest within the loan in the form of a higher interest rate.
• C) Prepayment penalties are unlimited unless they are capped in the mortgage agreement.
• D) Lenders are not required to determine whether the borrower could afford the monthly mortgage/payments, combined with insurance and assessments.

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Definitions:

Profitability Index

A financial tool that calculates the relationship between the costs and benefits of a proposed project through its net present value.

Internal Rate Of Return

A metric used in capital budgeting to estimate the profitability of potential investments, calculating the interest rate at which the net present value of all the cash flows (both positive and negative) from a project or investment equals zero.

Discount Rate

In the realm of discounted cash flow analysis, this is the interest rate used for estimating the present value of future financial inflows.

Anticipated Annual Incremental

Expected yearly increases in revenue or benefits as a result of a particular action or investment, not considering future inflation or changes in currency value.