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Financial AFE Exam
Accredited Financial Examiner (AFE) (Page 6 )

Updated On: 12-Jan-2026
Page 6 of 59
PDF with 286 Questions

The balloon payment technique uses level payments of principal and interest but for a shorter period than is required to retire the loan fully during its term. For example, a loan with a 8.5 percent interest rate utilizing a 25-year amortization schedule with a 7-year maturity results in only $111 of each $l, 000 principal being repaid. Thus, $889 of each $l, 000 originally borrowed constitutes the ____________ balloon amount due at maturity.

  1. 7th-year
  2. 5th-year
  3. 6th-year
  4. 4th-year

Answer(s): A



With the advent of adjustable rate mortgages, amortization schedules are adjusted periodically as dictated by the terms of the loan agreement. A _____________file is used to indicate when to adjust the rate. Most computer software systems can adjust amortization schedules by reminding the company of change dates, accept current rate adjustments, and to produce new schedules.

  1. Automated software
  2. Tickler or reminder
  3. Emergency
  4. Excel

Answer(s): B



Generally, Participation income is an income stream due the company and is based upon the financial results of the borrower and/or borrowing business entity. Although it can take several forms, the more prominent ones are:

  1. Participation in revenue generated by the mortgaged property above a specified sum, such as a percentage of gross sales in excess of a specified dollar volume
  2. Participation in profits from the mortgaged property, such as a percentage of gross income less defined expenses
  3. Percentage of gross sales in excess of a specified dollar volume
  4. percentage of net sales in excess of a specified dollar volume

Answer(s): A,B



Accounting for escrow funds is difficult because of the large number of transactions related to such funds. A separate bank account or a trust bank account may be opened, with all escrow receipts deposited into it to prevent:

  1. Commingling of escrow funds with a company's operating funds
  2. Commingling of escrow funds with a company's liabilities
  3. Commingling of escrow funds with a company's mortgage funds
  4. Commingling of escrow funds with a company's fixed funds

Answer(s): A



It is defined as a debt restructuring whereby the insurer for economic or legal reasons related to borrower financial difficulties, grants a concession to the debtor that it would not otherwise grant.

  1. A troubled debt restructuring
  2. Commercial debt restructuring
  3. Mortgage debt restructuring
  4. Residential debt restructuring

Answer(s): A



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