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SOFE Accredited Financial Examiner AFE Question # 37 Topic 4 Discussion

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SOFE Accredited Financial Examiner AFE Question # 37 Topic 4 Discussion

AFE Exam Topic 4 Question 37 Discussion:
Question #: 37
Topic #: 4

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:
A.

Lower than the rate on the loan being repaid the borrower has to make up the interest rate differential and the lender is essentially “made whole” for a potential loss of interest.

B.

Greater than the rate on the loan being repaid the borrower has to make up the interest rate differential and the lender is essentially “made whole” for a potential loss of interest.

C.

Equal to the rate on the loan being repaid the borrower has to make up the interest rate differential and the lender is essentially “made whole” for a potential loss of interest.

D.

Lower than the rate of interest being paid to the borrower has to make up the interest rate differential and the lender is essentially “made whole” for a potential loss of interest.

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Actual exam question for SOFE AFE exam by Quill86064 at Aug 3, 2025, 12:00:00 AM

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