When Banks Bundled Mortgage Loans and Sold the Resulting Mortgage-Backed

question 175

Multiple Choice

When banks bundled mortgage loans and sold the resulting mortgage-backed securities,

• A) they insulated the banking system from any risk associated with mortgage defaults.
• B) they greatly reduced the overall risk of mortgage defaults.
• C) buyers of these securities assumed all of the risk of mortgage defaults.
• D) they reduced their direct exposure to mortgage default risk but were still exposed through loans to investors in mortgage-backed securities.

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Definitions:

Conj

A conjunction is a logical operator that connects two statements in a way that the resulting statement is true only if both connected statements are true.

MP

Modus Ponens, a fundamental rule of logical deduction allowing one to derive a conclusion from a conditional statement and its antecedent.

Conj

A shortened form of conjunction, referring to a grammatical connector between words, phrases, or clauses.

Simp

Slang for someone who is perceived to be overly subservient or attentive towards another person, often in pursuit of emotional or romantic attention.