14-20

14. The transfer of default risk to the mortgage buyer loosens the incentive of to perform each of the steps of the lending process. A) the originator B) the buyer C) the borrower D) the homeowner When considering the decision to refinance a mortgage, the borrower must take into account not only the difference in interest rates, but also the A) fees or points B) documentation C) effort D) time 15. required for refinancing. In exchange for points paid up front, the financial institution originating the mortgage will A) waive private mortgage insurance. B) increase the interest rate. C) reduce the interest rate. D) extend the maturity period. 16. Derivative securities allow willing to bear more A) losses B) volatility C) returns D) risk 17. to be transferred from those that want less to those that are A type of forward contract that investors can use to hedge against change in an interest rate over a time period is a(n) A) forward rate agreement B) interest rate option C) interest rate future D) currency forward I8. As an option approaches its expiration date, its time value approaches A) the intrinsic value. B) the strike price. C) unity. D) zero. 19. underlying commodity in 90 days. Today the underlying You have agreed to deliver the commodity price rises and you get a margin call. You must have A) A long position in a futures contract B) A short position in a futures contract C) Sold a forward contract D) Purchased a forward contract 20