Assume That a Borrower Has a Choice Between Two Comparable

question 29

Multiple Choice

Assume that a borrower has a choice between two comparable fixed-rate mortgage loans with the same interest rate, but different mortgage terms, one being a 30-year mortgage and the other a 15-year mortgage. Under financially unconstrained circumstances, which of the following statements best describes the borrower's preference?

• A) The borrower would prefer the 30-year mortgage.
• B) The borrower would prefer the 15-year mortgage.
• C) The borrower would be indifferent between the two mortgages.
• D) The borrower is unable to compare mortgage loans of two different maturities.

---

Definitions:

Dishonor

The refusal or failure to accept or pay a bill of exchange, promissory note, or other negotiable instrument when due.

Primary Liability

The direct responsibility to pay or compensate for a loss or damage, without the necessity to seek contribution from others.

Cashier's Checks

A check guaranteed by a bank, drawn on the bank's own funds and signed by a cashier.

Capacity

The legal ability of a person to enter into a contract, often determined by factors such as age, mental competency, and legal status.