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

CFA Level 1 Question of the Week – Fixed Income

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  • Matt_AnalystPrep
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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.
    Matt_AnalystPrep
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    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.

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