One of the Contributing Factors in the 2007 U

question 94

Multiple Choice

One of the contributing factors in the 2007 U.S.residential housing collapse was the use of option reset adjustable rate mortgages (ARMs) .Which of the following best describes this financial vehicle?

• A)Mortgage payments were set based on prevailing market interest rates but on only a portion of the value of the mortgage. The unpaid balance was deferred for payment in a future period.
• B)The payment on the mortgage, at prevailing market rates, was based on the full value of the mortgage but was split between a portion of the payment made by the property owner, with the balance paid by a third-party financial institution.
• C)Payments made on the full value of the mortgage were based on below-market interest rates. Balances owing as a result of the difference between this rate and the prevailing market interest rate were carried forward and ultimately resulted in significantly higher future payments.
• D)Lending authorities initially allowed for the issuance of adjustable rate mortgages but subsequently disallowed them when it "tightened the rules." The new requirement that all mortgages be on a fixed rate basis resulted in the exclusion of many potential new home buyers, thus drying up demand in the residential housing market.

Comprehend the formation requirements and procedures for LLPs and limited partnerships.

Recognize the advantages of forming an LLP and how it affects partner liabilities.

Identify the financial responsibilities of partners in different partnership structures.

Understand how participation in management impacts the liability of partners in limited partnerships.

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Definitions:

Vigorously

Performed with force, energy, or intense activity.

Journal

A periodic publication that focuses on a particular academic field or area of interest, containing articles, studies, and research findings.

Spiritual Concept

refers to ideas, beliefs, or principles related to the soul, spirit, or sacred matters, playing a role in an individual's sense of meaning and purpose in life.

Hope

A feeling of expectation and desire for a certain thing to happen.