By the Height of the Housing Bubble in 2005 and Early

question 120

Multiple Choice

By the height of the housing bubble in 2005 and early 2006,lenders had greatly loosened the standards for obtaining a mortgage loan,with many mortgages being granted to sub-prime borrowers ________ and "Alt-A" borrowers ________.

• A)with flawed credit histories; who did not document their incomes
• B)who borrowed money at rates below the prime interest rate; who had AAA credit ratings
• C)who borrowed more than 120 percent of the value of the house; with no proof of U.S.citizenship
• D)who purchased homes in depressed housing markets; who purchased homes which were repossessed by government agencies.

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Definitions:

Market Adjustment

Market adjustment is the process of modifying the value of an asset or inventory to reflect its current market value rather than its book value, often due to changes in demand, supply, or economic conditions.

Journal Entry

A record in accounting that shows the economic effects of transactions on the accounts of a business.

Held-to-Maturity Debt Securities

Investments in debt securities that a company has the positive intent and ability to hold until maturity.

Financial Statements

Compiled reports that provide an overview of a business’s financial condition, including income statement, balance sheet, and cash flow statement.