Which of the Following Is the Best Definition of a Subprime

question 88

Multiple Choice

Which of the following is the best definition of a subprime mortgage?  

• A) a mortgage that is offered at a discount to prime 
• B) a mortgage that is offered to customers who buy houses in unattractive areas 
• C) a mortgage that is offered outside of the traditional banking system 
• D) a mortgage for a borrower with a poor credit rating

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Definitions:

Allowance Method

An accounting technique used to account for bad debts by estimating uncollectible accounts at the end of each period.

Allowance for Doubtful Accounts

A contra asset account used to estimate the portion of a company's accounts receivable that may not be collected.

Write-off

The process of recognizing that a portion of a company's inventory or accounts receivable is no longer valuable and removing it from the financial statements.

Service Charge

A fee collected for services provided, often added to the base cost of services in industries such as hospitality, banking, and utilities.