The Bursting U

question 48

Multiple Choice

The bursting U.S. housing bubble of 2007 did not trigger an immediate recession because

• A)previous homeowners were able to move into apartments.
• B)mortgage interest rates remained relatively low.
• C)Democrats in control of Congress passed new tax cuts for distressed homeowners.
• D)all of the options are correct.

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Definitions:

Interest Expense

The cost incurred by an entity for borrowed funds, calculated as the principal times the interest rate over a period.

Residual Value

The estimated value that an asset will have at the end of its useful life, often used in calculating depreciation.

Capital Lease

A type of long-term lease agreement in which the lessee essentially buys an asset and pays for it over the lease term, with the asset's ownership potentially transferring to the lessee at the lease's end.

Bargain Purchase Option

A provision in a leasing contract permitting the lessee to buy the leased item for a price well below the anticipated market value once the lease period concludes.