CFA CFA Level 1 CFA Level 1 Question of the Week – Fixed Income

CFA Level 1 Question of the Week – Fixed Income

  • This topic has 2 replies, 2 voices, and was last updated Mar-22 by Avatar of ArnoldArnold.
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      A mortgage that starts at a fixed rate initially and is converted to a different fixed rate at a later date is most likely referred to as a:

      • A. hybrid mortgage.
      • B. rollover mortgage.
      • C. convertible mortgage.
    • Up

      The correct answer is B.

      A mortgage that starts out with a fixed rate and converted to a fixed rate later is referred to as a rollover or renegotiable mortgage. These are often used in Canada, Germany, Denmark, etc.

      If the mortgage starts at a fixed rate and is later converted into an adjustable rate mortgage, then we would say this is a hybrid mortgage.

      A convertible mortgage is an adjustable-rate loan that gives the borrower the option to convert the loan to a fixed-rate mortgage.

    • Up

      Thank you for the detailed and detailed answer. I think that everyone intuitively guessed which answer was correct. It is worth adding more complex tasks to think about the answer. I have recently been very interested in real estate and mortgages.

      Arnold voted up
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