Based on the Following Diagram

question 30

Multiple Choice

based on the following diagram:

-In deciding whether or not to go to college,one would compare the discounted value of:

• A)area 3 to the discounted value of area 1
• B)area 3 to the discounted value of area 2
• C)area 3 to the discounted value of areas 1 and 2
• D)areas 2 and 3 to the discounted value of area 1

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Definitions:

Mortgage Portfolio

A collection of mortgage loans held by a financial institution or investor.

Credit Swap

A financial derivative contract allowing two parties to exchange streams of interest payments or commodity flows for a set period, based on a predetermined notional principal amount.

Mortgage-Backed Securities

These are bonds secured by home and other real estate loans. They are created by pooling mortgages and then selling interests in that pool to investors.

FNMA

The Federal National Mortgage Association, known as Fannie Mae, a government-sponsored enterprise that provides liquidity to the mortgage market.