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SOFE Exam AFE Topic 1 Question 55 Discussion

Actual exam question for SOFE's AFE exam
Question #: 55
Topic #: 1
[All AFE Questions]

Prepayment of a conventional mortgage loan, prior to its specified maturity, is discouraged through the general market acceptance of significant prepayment penalties. Often these penalties are calculated so that when prevailing market interest rates are:

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Suggested Answer: D

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Merilyn
3 days ago
That's an interesting perspective, Fausto. I can see your point. But I still think A makes more sense in this scenario.
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Fausto
4 days ago
I disagree, I believe the answer is B. The borrower has to make up the interest rate differential when prevailing market interest rates are greater than the rate on the loan being repaid.
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Merilyn
12 days ago
I think the answer is A, because the borrower has to make up the interest rate differential when prevailing market interest rates are lower than the rate on the loan being repaid.
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