Introduction to Finance

1.
2 to 40 years
b. 
Treasury notes/bonds 
2.
no maturity
c. 
mortgages
3.
2 to 30 years 
d. 
municipal bonds 
4.
5 to 30 years 
 21. 
(LO 7.6)
What is a mortgage? What is meant by the term 
mortgage 
markets
?
 22. 
(LO 7.6)
Identify and briefl y describe the two major types of 
residential real estate mortgages.
 23. 
(LO 7.6)
What is meant by the term 
securitization
? What is a 
mortgage-backed security?
 24. 
(LO 7.6)
Briefl y describe credit ratings and credit scores.
 25. 
(LO 7.6)
Identify and describe the roles of several major parti-
cipants in the secondary mortgage markets.
 26. 
(LO 7.7)
What role did individuals play in the development of the 
2007–08 fi nancial crisis?
Problems
1. 
A very small country’s gross domestic product is $12 million. 
a. 
If government expenditures amount to $7.5 million and gross 
private domestic investment is $5.5 million, what would be the 
amount of net exports of goods and services? 
2. 
How would your answer change in Problem 1 if the gross domestic 
product had been $14 million? 
3. 
Personal income amounted to $17 million last year. Personal current 
taxes amounted to $4 million and personal outlays for consumption 
expenditures, nonmortgage interest, and so forth were $12 million.
a. 
What was the amount of disposable personal income last year?
b. 
What was the amount of personal saving last year?
c. 
Calculate personal saving as a percentage of disposable personal 
income.