The Financial Crisis 6. What are subprime mortgages? 7. What is an unconventional mortgage? 8. What...
The Financial Crisis
6. What are subprime mortgages?
7. What is an unconventional mortgage?
8. What is a collateralized debt obligation?
9. What is a credit default swap?
10. How did the collapse of housing prices in 2007 affect bank balance sheets?
Homework Answers
6) A subprime mortgage is a type of loan given to individuals who have a poor credit score. These poor credit scores is a result of their deficient credit histories. Due to this, they are not able to qualify for conventional mortgage. As these individuals possess higher risk for the lenders, subprime mortgages usually charge interest rates above the prime lending rate.
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The Financial Crisis
6. What are subprime mortgages?
7. What is an unconventional mortgage?
8. What...
4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the followin...
4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the following characteristics? Check all that apply. They have lower overall interest rates than most other mortgages. They are made to people with relatively few assets. They have a higher likelihood of default. Subprime mortgages expanded to about 35% of all mortgages issued in the United States in 2004. which of the following contributed...
Use the America’s Subprime Mortgage Crisis discussion thread to discuss the mortgage crisis that the United...
Use the America’s Subprime Mortgage Crisis discussion thread to discuss the mortgage crisis that the United States is witnessing. How did the collapse of companies like AIG, Lehman Brothers, Washington Mutual, Royal Bank of Scotland, etc. impact mortgages in and throughout the United States? As homeowner’s, how concerned were you about the safety and security of your mortgage or the mortgage of a friend or family member? Why were subprime mortgages a major contributor to the global financial crisis?
What were the mechanics of Subprime Mortgage crisis? Why it happened Consider me a non financial...
What were the mechanics of Subprime Mortgage crisis? Why it happened Consider me a non financial person and make sure that I get it early. Subprime mortgage crisis 2008 Housing bubble in USA
Credit Crisis of 2008–2009 Lessons Learned Your postings should be qualitative and provide substantive depth that...
Credit Crisis of 2008–2009 Lessons Learned Your postings should be qualitative and provide substantive depth that advances the discussion. Banks specialize in risk management. These banks invested heavily in mortgage backed securities expected fairly high returns from these highly rated financial instruments However, banks did not expect the credit crisis of 2008–2009 and the default rates due to declines in housing prices causing people to owe more than the house was worth. What are some lessons learned due to the...
One of the most discussed topics in finance recently is the global economic crisis that...
One of the most discussed topics in finance recently is the
global economic crisis that is said to have begun in the 2000s.
Your professor instructed your team to write an article for the
college newspaper. Your friend has written the first draft of the
article, which captures the essence of the global economic crisis.
She has left some important points for you to review and has asked
you to check the summary. Which statements belong in the summary?...
uestion 10(9 pts); Please answer the following questions about securitization: What are MBS (mortgage-backed securities), CDO...
uestion 10(9 pts); Please answer the following questions about securitization: What are MBS (mortgage-backed securities), CDO (collateralized debt obligations), and synthetic CDO? What are the differences between MBS and CDO? What is SPV (special purpose vehicle)? How did SPV contribute to the financial crisis of 2007- 2009?
Prior to the Financial Crisis, rating agencies mistakenly rated Mortgage Backed Securities (MBS) too high because:...
Prior to the Financial Crisis, rating agencies mistakenly rated Mortgage Backed Securities (MBS) too high because: Historically, mortgages have very low default rates. The payments on the MBS’s were “insured” by credit default swaps. The agencies didn’t account for the increase in sub-prime mortgages. All of the above. Why should credit analysts be concerned if a company’s stock trades below book value? It means the company is probably going bankrupt It means the company will probably incur lots of debt...
More on types of bonds 1- You can distinguish the various types of bonds by their...
More on types of bonds
1- You can distinguish the various types of
bonds by their terms of the contract, pledge of collateral, and so
on. Identify the type of bond based on each description given in
the table that follows: (Types of Bonds: Junior Mortgage
Bonds/ Debentures/ Subordinate Debentures/ Senior Mortgage
Bonds)
Description
Type of Bond
a) These bonds are collateralized securities with first claims
in the event of bankruptcy.
?
b) These bonds are not backed by any...
List 1 1. Asset bubble 2. Currency crisis 3. Open capital markets 4. Sovereign debt 5....
List 1 1. Asset bubble 2. Currency crisis 3. Open capital markets 4. Sovereign debt 5. Sudden stop 6. Banking crisis 7. Credit boom 8. Private external debt 9. Trade deficit 10. Overvalued currency 11. Herd behavior List 2. Find the item in list 1 that is most closely associated with the following items a. Residents of a country are free to buy foreign assets and foreigners are free to lend to domestic residents b. The tendency of investors to...
How did the financial crisis of 2007–2009 affect the size and composition of the balance sheet of the Federal Reserve? I...
How did the financial crisis of 2007–2009 affect the size and composition of the balance sheet of the Federal Reserve? Instructions: In order to receive full credit, you must make a selection for each option. For correct answer(s), click the box once to place a check mark. For incorrect answer(s), click the option twice to empty the box. The Fed narrowed the range of assets held to include safer instruments. On the liability side of the balance sheet, commercial bank...
4. The subprime mortgage market The financial crisis started with defaults-borrowers not repaying their loans-on subprime mortgages in the United States. Subprime mortgages have which of the following characteristics? Check all that apply. They have lower overall interest rates than most other mortgages. They are made to people with relatively few assets. They have a higher likelihood of default. Subprime mortgages expanded to about 35% of all mortgages issued in the United States in 2004. which of the following contributed...
One of the most discussed topics in finance recently is the
global economic crisis that is said to have begun in the 2000s.
Your professor instructed your team to write an article for the
college newspaper. Your friend has written the first draft of the
article, which captures the essence of the global economic crisis.
She has left some important points for you to review and has asked
you to check the summary. Which statements belong in the summary?...
uestion 10(9 pts); Please answer the following questions about securitization: What are MBS (mortgage-backed securities), CDO (collateralized debt obligations), and synthetic CDO? What are the differences between MBS and CDO? What is SPV (special purpose vehicle)? How did SPV contribute to the financial crisis of 2007- 2009?
More on types of bonds
1- You can distinguish the various types of
bonds by their terms of the contract, pledge of collateral, and so
on. Identify the type of bond based on each description given in
the table that follows: (Types of Bonds: Junior Mortgage
Bonds/ Debentures/ Subordinate Debentures/ Senior Mortgage
Bonds)
Description
Type of Bond
a) These bonds are collateralized securities with first claims
in the event of bankruptcy.
?
b) These bonds are not backed by any...
List 1 1. Asset bubble 2. Currency crisis 3. Open capital markets 4. Sovereign debt 5. Sudden stop 6. Banking crisis 7. Credit boom 8. Private external debt 9. Trade deficit 10. Overvalued currency 11. Herd behavior List 2. Find the item in list 1 that is most closely associated with the following items a. Residents of a country are free to buy foreign assets and foreigners are free to lend to domestic residents b. The tendency of investors to...
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