When Current Mortgage Rates Fall Sufficiently Low That the Present

question 55

Multiple Choice

When current mortgage rates fall sufficiently low that the present value savings of refinancing outweigh the cost of prepayment penalties (and other fees and costs) , the mortgage holders are said to have a valuable:

• A)put option
• B)call option
• C)forward agreement
• D)futures contract

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Definitions:

Constructive Fraud

Conduct that is treated as fraud under the law even when there is no proof of intent to defraud, usually because of the existence of a special relationship or fiduciary duty.

Fraudulent Intent

The deliberate intention to deceive another party for unlawful gain or to deprive a victim of a legal right.

Privity

The relationship between parties that are legally participating in the same transaction or agreement.

Accountant Negligence

A situation where an accountant fails to perform their duties with the required level of care and accuracy, leading to financial loss.