In Addition to the Need for a Hefty Down Payment

question 12

Multiple Choice

In addition to the need for a hefty down payment, buying a home prior to WWII was challenging because

• A)there were an insufficient number of homes available.
• B)instead of 15 - 30 years to repay the loan, borrowers had only five years.
• C)mortgage interest rates were very high.
• D)banks had insufficient reserves to make mortgage loans.

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Definitions:

Total Risk

The complete range of risks involved in an investment, encompassing both systematic and unsystematic risks.

Expected Return

The anticipated amount of profit or loss an investment is expected to generate over a given period.

Securities

Financial instruments that represent ownership positions in corporations (stocks), creditor relationships with corporations or governmental bodies (bonds), or rights to ownership as represented by an option.

Capital Allocation Line

A line on a graph that shows the risk-reward ratio of portfolios that combine a risk-free asset and a risky portfolio.