Define the Term Subprime Loan

question 105

Essay

Define the term subprime loan. Give a brief history of how the incidence of subprime mortgage loans changed between 1995 and 2003,and explain the factors that contributed to a number of subprime borrowers being unable to repay their loans in recent years.

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Definitions:

Partial Equity Method

An accounting technique used for investments where the investor has significant influence but does not fully control the investee, recognizing income proportionate to the level of ownership.

Equity Method

An accounting technique used to record investments in which the investor has significant influence but no control over the investee, recognizing the investor's share of the investee's profits and losses.

Partial Equity Method

An accounting approach used when an investing entity owns a significant but not controlling stake in another company, recognizing income based on the proportionate share of the investee's earnings.