QUESTION 7 Which of the following statements regarding a 15-year (180-month) $125,000, fixed-rate mortgage is CORRECT? (Ignore taxes and tranuctions costs) on. The remaining balance after three years will be $125,000 less one third of the interest paid during the first three years b. Because it is a fixed-rate mortgage, the monthly loan payments (which include both interest and principal payments) are constant Oc Interest payments on the mortgage will increase steadily over time, but the total amount of each payment will remain constant The proportion of the monthly payment that goes towards repayment of principal will be lower 10 years from now than it will be the first O d. year The proportion of the monthly payment that goes towards repayment of principal will be higher 10 years from now than it will be the first O e. year QUESTIONS If the pure expectations theory of the term structure is correct, which of the following statements would be CORRECT? os. An upward-sloping yield curve would imply that interest rates are expected to be lower in the future If a 1-year Treasury bill has a yield to maturity of 7% and a 2-year Treasury bill has a yield to maturity of 8%, this would imply the market O. believes that 1-year rates will be 7.5% one year from now a c. The yield on a 5-year corporate bond should always exceed the yield on a 3 year Treasury bond. d. Interest rate (price risk is higher on long-tern bonds, but reinvestment rate risk is higher on short-term bonds e. Interest rate (price) risk is higher on short-term bonds, but reintestment rate risk is higher on long-term bonds