Practice Test Geeks(CMA) Certified Mortgage Advisor Practice Test
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Interest Rates & Economic Factors Flashcards

7 cards from real CMA practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Interest Rates & Economic Factors flashcards as text

  1. Which Federal Reserve tool most directly influences short-term interest rates in the US?

    Answer: Federal funds rate target

    The federal funds rate target set by the FOMC is the primary benchmark that directly steers short-term borrowing costs throughout the economy.

  2. When the yield curve inverts, what does it signal about the economy?

    Answer: Potential recession in 6–18 months

    An inverted yield curve, where short-term yields exceed long-term yields, has historically been a reliable predictor of economic recession within roughly 6–18 months.

  3. A borrower is choosing between a 5/1 ARM at 5.5% and a 30-year fixed at 6.25%. If rates are expected to rise significantly after 5 years, which is the better long-term choice?

    Answer: 30-year fixed, because it locks in today's rate before increases

    When rates are expected to rise significantly after the fixed period, a 30-year fixed mortgage protects the borrower from future payment shock.

  4. Which economic indicator is most closely watched as a leading predictor of mortgage application volume?

    Answer: 10-year Treasury yield

    The 10-year Treasury yield is the benchmark most directly tied to 30-year fixed mortgage rates, making it the primary leading indicator for mortgage volume.

  5. What is the relationship between inflation expectations and long-term mortgage rates?

    Answer: Higher inflation expectations push long-term rates up

    Lenders demand higher nominal interest rates when inflation expectations rise to preserve the real return on their loan investment.

  6. A mortgage has a periodic cap of 2% on a 3/1 ARM. If the index rises 4% at the first adjustment, what is the maximum rate increase?

    Answer: 2%

    The periodic cap limits how much the rate can change at any single adjustment interval, regardless of how much the underlying index moves.

  7. Which of the following best describes the 'spread' on a mortgage rate?

    Answer: The margin added above the benchmark index to determine the mortgage rate

    The spread (or margin) is the fixed percentage added above the index rate to compensate the lender for credit risk, servicing costs, and profit.