1. Consider the following statements about interest only loans: A. Interest only loans are attractive to borrowers because there is no need to make periodic payments. B. Real estate developers often prefer this type of loan because financing payments are kept to a minimum when they need their resources to finance construction. C. Lenders often approve these loans because a longer period of repayment reduces risk. D. Interest only loans are never fully repaid because they accrue interest indefinitely. E. Lenders are able to lessen the amount of income risk associated with a loan when they agree to accept interest only payments. Which of the above statements are TRUE? (1) Only B and E (2) Only A, B, and C (3) Only B, C, and E (4) None of the above 2. On an interest accrual loan: (1) the interest earned on the outstanding principal is paid periodically as charged. (2) no payments of interest and no repayments of principal are due until maturity. (3) a longer term reduces the risk to the lender. (4) a constant amount of principal is repaid every interest compounding period. 3. An interest only loan in the amount of $350,000 was issued January 1 , three years ago. The interest rate charged on the loan is 6% per annum, compounded semi-annually with semi-annual payments. If the term of the loan is 3 years, what amount will be due and payable on January 1 , this year? (1) $10,500 (2) $21,000 (3) $350,000 (4) $360,500