A Fundamental Problem with Goldman Sachs' GSAMP Trust Was That

question 9

Multiple Choice

A fundamental problem with Goldman Sachs' GSAMP Trust was that

• A) loans were given to people with poor credit histories.
• B) homeowners' equity in the securitized mortgages was less than 1 percent on average.
• C) loans were given to people with no income.
• D) a sizeable portion of the securitized loans had little or no documentation.
• E) All of these are correct.

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Definitions:

Plant Asset

Long-term tangible assets used in the operation of a business and not intended for resale, such as machinery, buildings, and vehicles.

Loss

The negative result when expenses exceed revenues during a specific period.

Sale

The exchange of goods or services for money or other compensation, forming the primary revenue-generating activity of a business.

Journal Entry

A record in accounting that logs every financial transaction a business makes, showing which accounts are affected and by how much.