Fannie Mae and Freddie Mac Experienced Financial Problems During the Credit

question 63

Multiple Choice

Fannie Mae and Freddie Mac experienced financial problems during the credit crisis because they:

• A) were unwilling to finance new mortgages.
• B) invested heavily in balloon mortgages.
• C) invested only in prime mortgages that offered very low returns.
• D) invested heavily in subprime mortgages.

---

Definitions:

FIFO

"First In, First Out," an inventory valuation method where the oldest stock is sold first.

Tax Purposes

The reasonings or rationalizations related to the computation and payment of taxes, often guiding how financial transactions are structured or reported.

LIFO

Last-In, First-Out, an inventory valuation method where the most recently produced items are recorded as sold first.

Cost Flow Assumption

Accounting methods that companies use to assign costs to inventory and cost of goods sold, such as FIFO, LIFO, and weighted average cost.