Some Argue That the Financial Crisis of 2007-2008 Was Caused

question 147

Multiple Choice

Some argue that the financial crisis of 2007-2008 was caused by a poor understanding of risks in the economy.One reason for this is that:

• A) credit card companies did not disclose who defaulted on their loans.
• B) banks' secrecy laws prevented them from reporting which homeowners were behind in their mortgage payments.
• C) mortgage brokers did not use the Internet to check on default rates.
• D) some bond rating agencies' ratings did not disclose the true extent of the riskiness of mortgage-backed assets.

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Definitions:

Amortization

The process of gradually writing off the initial cost of an intangible asset over a period of time, reflecting its consumption, expiration, or obsolescence.

Accounting Period

The time period covered by the financial statements.

Maturity Value

The amount payable to an investor at a security's maturity date, including both the principal and any final interest payments.

Bonds

Long-term debt instruments issued by corporations or governments to raise capital, with the issuer promising to pay back the principal along with interest on specified dates.