While Balloon Mortgage Loan Payments Are Typically Based on a 30-Year

question 16

Multiple Choice

While balloon mortgage loan payments are typically based on a 30-year amortization schedule,the loan actually matures in either 3,5,7,or 10 years.The relatively short loan term on a balloon mortgage reduces the lender's exposure to which of the following risks?

• A)Default risk
• B)Interest rate risk
• C)Liquidity risk
• D)Financial risk

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Definitions:

Demand Shifts

Demand shifts occur when the overall demand for a product or service increases or decreases due to changes in consumer preferences, income levels, prices of related goods, and other factors.

Technology Changes

The process of innovation and improvement in technology, affecting productivity, efficiency, and society's overall way of life.

Depression Phase

An economic downturn marked by a long period of decline in GDP, high unemployment, falling prices, and reduced levels of trade and investment.

Unemployment Rate

The percentage of workers who are jobless and actively seeking positions.