Based on the Rising Housing Prices of 2000-2005, Many Buyers

question 57

Multiple Choice

Based on the rising housing prices of 2000-2005, many buyers opted for interest-only loans and variable rate mortgages with little or no down payment because

• A) they expected short-term interest rates to fall substantially in the future and this would reduce their monthly mortgage payment in the years ahead.
• B) variable rate mortgages are a good way to reduce the risk accompanying your investment when you plan to stay in the house for a long time.
• C) they thought housing prices would continue to rise and therefore they would be able to sell the house for a profit within a couple of years.
• D) they could easily recoup their investment, even if there was a downturn in housing prices in the future.

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Definitions:

Net Profit

The amount of money a company earns after deducting all costs, expenses, and taxes from the total revenue.

Partnership Agreement

A legal document that outlines the terms and conditions governing the relationship between partners in a business partnership.

Cash Withdrawal

The act of taking money out of a bank account or investment.

Payroll

The total amount of wages and salaries paid by a company to its employees for a set period, including necessary taxes and deductions.