Exam 3 | FIN 3113 - Financial Systems, Quizzes of Finance

Download Exam 3 | FIN 3113 - Financial Systems and more Quizzes Finance in PDF only on Docsity! TERM 1 I and III only DEFINITION 1 if interest rates fall below the coupon rate on the mortgages in a pool, which of the following are likely? I. the value of an IO may fall rather than riseII. the value of a PO will rise, but by less than a similar straight coupon bondIII. the value of a PO will rise, butby more than a similar straight coupon bond IV. the cash flows to a pass through holder will fall this month TERM 2 foreclosure DEFINITION 2 ____ is the process of taking possession of the mortgaged property to satisfy the debt in the event of failure to repay the mortgage and foregoing claim to any deficiency TERM 3 capacity- whether the borrower has enough other credit available to pay off the loan in the event of cash flow problems DEFINITION 3 which one of the following 5 C's of credit is NOT correctly defined? TERM 4 loan amount/collateral value DEFINITION 4 most loan policies specify a maximum loan to value (LTV) ratio on real estate loans. the LTV is a ratio of TERM 5 ethnic background DEFINITION 5 individual credit scoring models typically include all of the following info except TERM 6 I and III only DEFINITION 6 in analyzing credit risk for a loan to a major diversified corporation the bank typically has which of the following advantages?I. market based models to analyze credit riskII. greater negotiating power due to the size of the loan requiredIII. ratings agency measures of default risk TERM 7 insolvency risk DEFINITION 7 a firm with a low z score has high TERM 8 II and III only DEFINITION 8 business credit scoring models suffer from several weaknesses. These include which of the following?I. Credit score models are not a statically sound tool to use in making a lending decision II. the appropriate weights on a credit score model are likely to change unpredictably over timeIII. these model ignore non quantifiable behavioral factors such as relationship with the bank and reputationIV. credit scoring models discriminate against minorities TERM 9 credit unions DEFINITION 9 important buyers of loans include all but which one of the following TERM 10 liquidity risk DEFINITION 10 the risk that an unanticipated increase in liability withdrawals may cause an FI to have to sell assets at fire sale prices is an example of TERM 21 a security with a prorata claim to the underlying pool of assets DEFINITION 21 a pass through security is best characterized as TERM 22 mortgaged backed bonds issued DEFINITION 22 which one of the following types of transactions leaves the assets on the balance sheet TERM 23 none of the above DEFINITION 23 for a loan sold with recourse TERM 24 vulture funds DEFINITION 24 ___ are specialized investment funds established to invest in distressed loans TERM 25 all of the above DEFINITION 25 the major government sponsored agencies involved in securitization of home mortgage loans are TERM 26 CMO DEFINITION 26 a ___ is similar to a "pass through" security, but it assigns different combinations of risk and return to various investor groups TERM 27 mortgage backed DEFINITION 27 with a ___ bond, mortgage loans are serving as collateral for the bond, but the bond's interest and principal payments are not necessarily directly connected to the mortgage payments TERM 28 correspondent banking DEFINITION 28 a significant part of ___ entails small banks selling off parts of their larger loans to bigger banks TERM 29 pass through securities DEFINITION 29 the gov't nat'l mortgage association is well known for its role in producing TERM 30 HLT loan DEFINITION 30 a loan that finances a merger or acquisition that results in a high leverage ration for the borrower is called a TERM 31 the bonds were marketable and the loans were not DEFINITION 31 banks were willing to swap LDC loans for brady bonds bc TERM 32 loan participation DEFINITION 32 the act of buying a share in a loan syndication with limited contractual control and rights over the borrower is called a TERM 33 above average; below average DEFINITION 33 in a 3 class sequential pay CMO if we consider class b holders as having average prepayment risk then class a holders have ___ prepayment risk and class c holders have ___ prepayment risk TERM 34 CMO DEFINITION 34 which one of the following forms of securitization is usually "double securitization" TERM 35 a and b only DEFINITION 35 loan sales are likely to continue bc