If a Bank Offers Mortgages That Do Not Require the Normal

question 79

Multiple Choice

If a bank offers mortgages that do not require the normal 20% down payment,the bank encourages

• A) people who know they might not pay off the mortgage.
• B) people who can't afford the down payment but can pay off the mortgage.
• C) people who know that they are going to pay off the mortgage.
• D) people who know they can't pay off the mortgage but who can afford the down payment.

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Definitions:

Put Option

A financial contract that gives the holder the right, but not the obligation, to sell a specified amount of an underlying asset at a set price within a specified timeframe.

In-The-Money

A term used in options trading to describe an option that has intrinsic value, where the strike price is favorable compared to the current market price of the underlying asset.

Stock Price

The current price at which a share of a company is being bought or sold in the stock market.

Exercise Price

The price at which the holder of an option can buy (in the case of a call) or sell (in the case of a put) the underlying security or commodity.