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Discuss how the subprime mortgage crisis of 2007 was based upon the flawed financial model that house prices only increase.
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- How did a decline in housing prices help trigger the subprime financial crisis that began in 2007? Explain.Why did actual home buyers/ borrowers start defaulting in the financial crisis of 2007/2008?A. What is the subprime mortgage market? B. What important role did these subprime mortgages play in the 2008 Financial Crisis?
- Define the following terms and explain why they were important during the housing and credit crisis of 2007-2009 a.Securitization b. Subprime loan c. Asset write-downThe zero-lower-bound problem: A. creates a negative shock to the economy. B. occurs because people can always earn more from holding bonds than holding cash... C. is responsible for the recession of 2007-2009. OD. implies that nominal interest rates can be zero.In periods when home prices declined substantially, some homeowners blamed the Central bank. In other periods when home prices increased, homeowners gave credit to the Central bank. How can the Central bank have such a large impact on home prices? How could news of a substantial increase in the general inflation level affect the Central bank’s monetary policy and thereby affect home prices?
- Do you think that IFRS 9 may make loans more expensive for borrowers? Implementation of IFRS 9 will influence borrower make less loan? Is there any needs of improvement with the relationship between borrowers and financial companies?Which explanation BEST describes John Maynard Keynes' "The Paradox of Thrift?" a. Individuals should reduce spending to cut debt. b. When an individual reduces her or his own spending, he or she reduces someone else's revenue. C. Individuals should borrow money during uncertain economic times. d. Individuals should only borrow money when times are good.Collateralized debt obligations (CDOs) and collateralized loan obligations (CLOs) were criticisedfor playing a key role in causing the financial crash of 2008. Despite such criticism, the CLO market has grown year on year, with record issuances during 2020 and 2021. Why have CLOs remained popular and, from the perspective of an investor, what is the appeal of CLOs?
- Which of the following did NOT help trigger the subprime crisis in 2007? Housing prices stopped climbing and actually started falling around 2006 Borrowers were offered teaser loans like 2/28 to get them into loans they could not otherwise qualify for Mortgage brokers were required by Sarbanes Oxley to personally pledge that all the loan information provided on loan applications was correct and they could be held personally responsible for any losses due to fraud Banks made loans to borrowers with very questionable income by using “liar loans”Discuss the 2007-2008 financial crisis and what impact it had on the financial markets. Who was impacted? What caused the crisis, and how can a future crisis be prevented?Which of the following was NOT a direct and major consequence of the 2007-2009 U.S. Subprime Financial Crisis? Group of answer choices a. Small consumer and household savers lost all their money they had in savings accounts due to the failure of many smaller FDIC member banks b. Many people lost their homes when they could no longer make their payments after their subprime mortgage rates reset to a much higher rate after two years c. Lehman suffered a major financial collapse and ultimately was dissolved after many of its remaining parts were purchased by Barclays and Nomura, among others d. The U.S. stock markets dropped dramatically as the credit fueled economy of the mid-2000s started to suffer after the credit bubble began to burst.