Requiring a Home Buyer to Have a Large Down Payment

question 24

Multiple Choice

Requiring a home buyer to have a large down payment reduces the risk to a mortgage lender because:

• A) it means that if the price of the house falls, the owner suffers the loss.
• B) the buyer is less likely to sell the house.
• C) it means the buyer likely underpaid when she bought the house.
• D) it means there is more information available on the buyer.

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Definitions:

Current Ratio

A financial metric indicating a firm's capability to settle short-term debts, determined by dividing its current assets by its current liabilities.

Balance Sheet

A financial statement that summarizes a company's assets, liabilities, and shareholders' equity at a specific point in time, providing a basis for computing rates of return and evaluating its capital structure.

Sales On Account

Transactions where goods or services are sold with payment to be received at a later date, often documented through invoices.

Cost Of Goods Sold

Direct expenditures linked to the making of products that a company offers for sale.