Monday, March 7, 2011

Chapter 6

David Mueller-Flores
FIN 180

1. Efficiency describes how quickly transaction prices within a market reflect relevant market information. True pg 124

2. Demand is the amount of a particular good that the market will purchase regardless of the price. False pg 125, top of the page

3. Supply is the amount of a particular good that the market will produce and offer for sale at a particular price. True pg 125, third paragraph first line

4. In a real estate market the supply-demand relationship during the long and short run are roughly the same. False, pg 129

5. The secondary mortgage market comprises of real estate owners that are in the process of purchasing their second home. False, pg 135

6. The person or group responsible for the housing crisis is …
a. Appraisers
b. Loan originators
c. W. Bush
d. All of the above
The answer is D, All of the above, pg 148-54. Not one person responsible everyone contributed.

7. The process of creating mortgage-backed securities is called …
a. Mortgage securitization
b. MBS
c. Disintermediation
d. None of the above
The answer is A, Mortgage securitization, pg 142

8. The popular name for the market serving residential mortgage borrowers who do not qualify for standard hence prime mortgages
a. Secondary market
b. Primary market
c. Subprime market
d. Less-optimal market
The answer is C, Subprime market, pg 140

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