An Institution That Originates and Holds a Fixed-Rate Mortgage Is

question 54

Multiple Choice

An institution that originates and holds a fixed-rate mortgage is adversely affected by ____ interest rates; the borrower who was provided the mortgage is adversely affected by ____ interest rates.

• A)stable; decreasing
• B)increasing; stable
• C)increasing; decreasing
• D)decreasing; increasing

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Definitions:

Project Profitability Index

A financial metric used to analyze the potential return of an investment project considering its present value of cash inflows and initial investment.

Investment Required

Investment required refers to the total amount of capital needed to undertake a project, start a new business, or make a significant purchase.

Profitability Index

A financial tool used to measure the relative profitability of an investment, calculated as the present value of future cash flows divided by initial investment.

Internal Rate Of Return

A discount rate that makes the net present value (NPV) of all cash flows from a particular project equal to zero.