Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter ST5, Problem 5CQ
To determine
The relationship between holding of mortgage properties and evaluation of a borrower’s creditworthiness.
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the first round of loans would amount to
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If the employer is insolvent to determine
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Can a debtor be put in delay and consequently, incur liability even without demand from creditor? explain
Chapter ST5 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- "The rate of return to bonds should be near equal to the equilibrium interest rate in the credit market." True or False?arrow_forwardWhy did housing prices rise rapidly during 2002 - 2005? Why did the mortgage default rate increase so sharply during 2006 and 2007 even before the 2008 - 2009 recession began? What did the Community Reinvestment Act have to do with the housing bubble and collapse? Cite your sources as needed. Use APA formatting.arrow_forwardBryan has applied for a mortgage with Bank of Amen. The bank is reviewing the amount of Bryan's monthly income that is used to pay his monthly debt to determine the level of risk in offering him a mortgage. Which of the following concepts characterizes the basic components of a credit score being utilized by the bank? A payment history B debt-to-income ratio с available credit D length of credit historyarrow_forward
- T/F People should buy bonds when they think that interest rates are as high as they will go.arrow_forwardA mortgage that requires a down payment of 5% of the purchase price of the house is called a good deal. an "upside-down" loan a subprime loan a prime loanarrow_forwardWith the biting economy and dwindling levels of income, many Microfinance clients have been affected and so MFIs are likely to experience low business and high defaults. As the CEO of the MFI in question, explain the measures you will take to tackle this challengearrow_forward
- If a lender faces a potential loan applicant pool made up of equal amounts of low risks and high risks, will charging an average interest rate for all provide the average (expected) return? Explain.arrow_forwardSubprime mortgages are O mortgages issued to borrowers with flawed credit histories. government-backed mortgages issued by Fannie Mae and Freddie Mac. mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgages. mortgages which are bundled together by financial institutions and sold to investors.arrow_forwardA bond is a financial asset where the issuer is obliged to pay a bond holder interest at specified intervals (the coupon) and/or to repay the principal at a specified future date (the maturity date). pays a rate of return (interest) that fluctuates with market conditions. receives regular payments from the bond holder determined at a market rate at the time of payment. pays a higher rate of return (yield) as the price of the bond rises.arrow_forward
- Rohan decides to invest in bonds instead of stocks because he has heard that bonds are a lower-risk investment. He uses the bond's credit rating to make his investment decisions. Which of the following is true about the risk Rohan faces with his decision? The bonds' value is not affected by inflation because most bonds pay a fixed coupon rate over time. The credit ratings of the bond-issuing companies will not change from one year to the next. The bond issuer may not pay him back because it may go bankrupt or become insolvent. If Rohan chooses bonds from a company with low credit ratings, he's almost certain to have low default risk.arrow_forwardBanks and other financial institutions offer small business loans based on all of these EXCEPT the ability to resell collateral used to secure the loan. willingness of venture capitalists to fund the business. potential for success of the business. firm's credit history.arrow_forwardWhich of the following is NOT typically a role for a financial intermediary...? make public financial statements of borrowers evaluate the riskiness of lending to borrowers pool funds from lenders monitor the financial conditions of borrowersarrow_forward
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