For Any Given Interest Rate, the Shorter the Life of the Mortgage

question 22

Multiple Choice

For any given interest rate, the shorter the life of the mortgage, the ____ the monthly payment and the ____ the total payments over the life of the mortgage.

• A)greater; greater
• B)greater; lower
• C)lower; greater
• D)lower; lower

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Definitions:

Portfolio

A group of individual assets held in combination. An asset that would be relatively risky if held in isolation may have little, or even no risk, if held in a well-diversified portfolio.

Beta

A measure of a stock's volatility in relation to the overall market, used in the capital asset pricing model to determine expected return.

Marginal Investor

An investor whose actions and decisions regarding buying or selling a security are believed to represent the overall market sentiment.

Risk Averse

Risk averse describes an individual or entity that prefers to minimize risk, opting for lower returns with known risks rather than higher returns with unknown risks.