During 2006-2008,the Housing Foreclosure Rate Rose Sharply
During 2006-2008,the housing foreclosure rate rose sharply
A)for fixed interest rate loans,but it was virtually unchanged for adjustable rate loans.
B)for adjustable rate loans to both sub-prime and prime borrowers,but there was little change in the foreclosure rate on fixed interest rate loans.
C)for adjustable rate loans to sub-prime borrowers,but the foreclosure rate on these loans to prime borrowers was virtually unchanged.
D)for adjustable rate loans to prime borrowers,but the foreclosure rate on these loans to sub-prime borrowers was virtually unchanged.
An SEC rule change allowing investment banks to increase the leverage of their investment capital prompted many investment banks to
A)increase the amount of assets held in relation to mortgage-backed securities being issued.
B)decrease the amount of assets held in relation to mortgage-backed securities being issued.
C)decrease the amount of mortgage-backed securities being offered.
D)reduce the ratio of mortgage loans to equity capital of the investment bank.
The mortgage-backed securities issued by investment banks caused many investment banks to fail when
A)stock prices declined by approximately 40 percent in 2008.
B)housing prices increased rapidly beginning in 2002.
C)federal regulators required investment banks to maintain more capital against their residential housing loans than was true for commercial business loans.
D)the default rates of the mortgages financed by the securities increased sharply.
Which of the following is an example of how incentive structures contributed to the collapse of investment banks?
A)The bonus structure of most executives was tied to long-term profitability.
B)The ratings agencies were paid attractive fees by investment banks seeking high ratings for their securities.
C)Mortgage-backed securities were closely scrutinized in order to minimize risk and obtain higher ratings.
D)Despite SEC regulations,investment banks kept leverage ratios low in order to increase profits.