Which of the Following Was a Contributing Factor to the Rising

question 85

Multiple Choice

Which of the following was a contributing factor to the rising default and foreclosure rates beginning in the latter half of 2006?

• A) The increasing share of 30-year, fixed rate loans as a share of outstanding mortgages.
• B) The rigid standards of rating agencies, such as Moody's and Standard and Poors, which limited the development of mortgage-backed securities.
• C) The price-stability policies of the Federal Reserve during 1998-2008.
• D) The erosion of lending standards during the preceding decade.

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Definitions:

Standard Deviations

A statistical measure that quantifies the amount of variation or dispersion of a set of data values, often used in finance to measure the volatility of an asset's returns.

Beta

A measure of a stock's volatility in relation to the overall market; a beta greater than 1 means the stock is more volatile than the market, while less than 1 means less volatile.

Residual Standard Deviation

A statistical measure that quantifies the amount by which an observed variable differs from its estimated value.

Sharpe's Measure

A risk-adjusted performance metric that measures the excess return per unit of deviation in an investment asset or portfolio.