1 Which of the following is not a common difference between prime and subprime loans? (4 Points)

a Subprime Mortgages have lower downpayments.

b Lower credit score requirements for borrowers in the subprime market.

c Subprime mortgages mature later.

d Higher interest rates for subprime mortgages 2 Which of the following types of loans has on average the lowest interest rate? (4 Points)

a Alt-A Loans

b Option ARM in the subprime market

c Hybrid ARM in the prime market.

d Conforming conventional loans.

3 How do Qualified Mortgages differ from other mortgages? (4 Points)

a Qualified Mortgages are subject to federal programs and are therefore tax exempt.

b Qualified Mortgages are subject to stricter regulations, e.g., the ability-to-pay standard.

c Only a certain percentage of Mortgages issued in a year can qualify and can receive the title "Qualified Mortgage", giving them a higher trustworthiness on the Mortgage market.

d All of the above

e None of the above

4 What can be among the costs of refinancing? (4 Points)

a Search costs for a new mortgage.

b Upfront fees

c Opportunity costs of not refinancing more cheaply within the close future

d All of the above

e None of the above