Question
a) True of False. The contractual interest rate and yield to maturity of a mortgage loan are same when there are NO fees, points and
a) True of False. The contractual interest rate and yield to maturity of a mortgage loan are same when there are NO fees, points and prepayment penalties associated with the loan.
True
False
b) All of the following are types of prepayment penalties EXCEPT.
Defeasance
Yield maintenance
Default differential
All of the above are types of prepayment penalties
c) All of the following are factors which one should include in the decision to refinance EXCEPT.
The consideration of the tax gains from interest saved.
The opportunity cost of investing the new loan fees elsewhere and not refinancing.
Bringing future savings into present value.
All of the above should be included in the decision to refinance
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