Adjustable Rate Mortgages

question 8

Multiple Choice

Adjustable rate mortgages

• A)reduce the interest-rate risk for financial institutions.
• B)benefit homeowners when interest rates rise.
• C)generally have higher initial interest rates than conventional fixed-rate mortgages.
• D)allow borrowers to avoid paying interest on portions of their mortgage loans.

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Definitions:

Net Credit Sales

The total value of sales made on credit minus returns and allowances, representing actual sales revenue earned and expected to be collected.

Honoring a Note

The act of paying off a note payable or bond at its maturity, fulfilling the issuer's obligation.

Note Receivable

A note receivable is a financial asset representing a written promise to receive a specific amount of money, with interest, from another party by a certain date.

Percent of Sales Method

A financial analysis tool used to forecast future expenses or accounts such as bad debts, based on a percentage of sales.