Which of the Following Is a Disadvantage of PLAMs

question 10

Multiple Choice

Which of the following is a disadvantage of PLAMs?

• A)Lenders face high levels of interest rate risk under PLAMs.
• B)Fewer homebuyers are likely to qualify for financing using PLAMs in comparison to CPMs.
• C)The price level used to index PLAMs is measured on an ex post basis and historic prices may not be an accurate reflection of future price.
• D)All of the above.

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Definitions:

Straight-Line Method

A method of depreciation that allocates an asset's cost evenly throughout its useful life.

Carrying Amount

The value at which an asset or liability is recognized on the balance sheet, calculated as its original cost minus depreciation or amortization.

Useful Life

The period over which an asset is expected to be available for use by an entity; or the number of production or similar units expected to be obtained from the asset by an entity.

Management Fee

A charge levied by an investment manager for managing an investment fund's assets, often calculated as a percentage of the assets under management.