Subprime Mortgage Crisis Question and Answers

Question 1

Who was the U.S. Treasury Secretary at the time this crisis unfolded?

Accepted Answer

Henry Paulson

Answer

John Thain

Answer

Barack Obama

Answer

Hillary Clinton

Question 2

How does leverage operate?

Accepted Answer

The more money an investor borrows, the higher the returns will be for the investment.

Answer

An investor must sell the item overseas for the leverage “tax” to kick in

Answer

Homeowners can exploit their position to negotiate cheaper interest rates.

Answer

The buyer must consent to paying less for the item than was expended on its acquisition.

Question 3

What happens to the value of properties owned by those who continue to make timely mortgage payments to the bank despite the fact that many of their neighbors have defaulted?

Accepted Answer

Their home goes down in value because of all the houses for sale

Answer

Their home goes up in value since they keep their yard kept up nicely.

Answer

Since they are one of the few people who consistently make their payments on time, their properties increase in value.

Answer

Since they previously agreed on the purchase price, their home's worth remains unchanged.

Question 4

Which of the following didn't contribute to the economic crisis?

Accepted Answer

Increasing interest rates

Answer

Government policies

Answer

Central Bank policies

Answer

Mortgage-backed securities and collateralized debt obligations are given the stamp of approval by credit rating organizations.

Question 5

What kind of financing traditionally lends to those who would not be able to qualify for a mortgage?

Accepted Answer

Sub-prime

Answer

Qib pro lending

Answer

Elastic return lending

Answer

Prime

Question 6

What kind of financial inducement prompted so many foreclosures?

Accepted Answer

The home is worth less than the amount of the mortgage.

Answer

The home is worth more than the amount of the mortgage.

Answer

Government tax credits for first time home owners.

Answer

Lower home mortgage interest rates.

Question 7

Which of the subsequent claims is untrue?

Accepted Answer

On subprime adjustable rate mortgages, lenders are 20% less likely to have started the foreclosure process than on standard mortgages.

Answer

Almost 40% of homes bought in 2005 and 2006 were not intended to be the buyer's primary residence.

Answer

Foreclosures place downward pressure on housing prices.

Answer

To finance their expenditure on goods and services while taking advantage of low interest rates, many homeowners took out second mortgages or home equity lines of credit.

Who was the U.S.Treasury Secretary at the time this crisis unfolded?

Who was the U.S.
Treasury Secretary at the time this crisis unfolded?