Subprime Mortgages

question 111

Multiple Choice

Subprime mortgages:

• A)carry an interest rate below the prime rate.
• B)are in default.
• C)are made to buyers who do not qualify for a standard mortgage.
• D)can be made only by the government.

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Definitions:

Capital Budgeting

Capital budgeting involves the process of deciding which long-term investments or projects a company should undertake, based on potential profitability and risk.

Cost of Capital

The minimum earnings rate required by a company on its investment endeavors to maintain market valuation and attract funding.

Budgetary Limit

The maximum amount of money allocated for a specific purpose in a budget.

IRRs

The Internal Rate of Return is the discount rate at which the net present value of all cash flows from a specific project is zero.