Recap of Financial Crisis and intro to Personal Finance

In the 2000's investor started investing in _________ because the rate of return was higher than that of government bonds.

• stocks

• mortgages

• certificates of deposit (CDs)

• futures

What are sub-prime mortgages?

• loans made below the prime home price

• loans made on below standard houses

• mortgages made below the average interest rate

• mortgages made to people with low incomes and poor credit

What was the housing bubble?

• A rapid increase in housing prices driven by irrational decisions.

• A steady increase in housing prices driven by predatory lending.

• A rapid decrease in housing prices driven by low interest rates.

• A rapid rise in interest rates driven by demand.

What happened when the home owners couldn't afford their payments anymore and defaulted on their loans? Check all that apply.

• more houses went on the market, which drove prices down

• big financial institutions stopped buying sub prime mortgages

• the housing demand went up, driving up housing prices

• investors started losing money on their mortgage investments

• big lenders started declaring bankruptcy

What happens to loans, prices, employment and business when the Federal Reserve lowers the rate.

• There are fewer loans, prices go down, employment goes up and business goes down.

• There are fewer loans, prices go up, employment goes up and business goes down.

• There are more loans, prices go down, employment goes down and business goes up.

• There are more loans, prices go up, employment goes up and business goes up.

What happened to the prices of houses after tons of people were taking out loans?

• They went down because Trump put a tariff on imported housing materials.

• They went down because so few people were getting loans, there was no one looking to buy.

• They went up because the banking industry could afford to loan people more money so they could buy more expensive homes.

• They went up because so many people were getting loans, demand exceeded supply.

What happened to housing sales as a result of the interest rate going up?

• Sales went up because so many homes were being sold by the banks after they had repossessed them because the owners didn't make their loan payments.

• Sales went down a lot because because people were afraid to take out loans because of how many homes the banks had repossessed.

• Sales went up dramatically because everyone was buying up the repossessed homes because they were so cheap.

• Sales went down dramatically because no one was taking out loans because of the high rates. People had to put their house "on sale"

What happened across the nation as these home loan investments started to fail?

• People started investing more in the stock market.

• People wrote to their congressmen to demand they make better bank rules.

• People were getting kicked out of their homes, housing prices went down, the stock market was crashing and businesses started losing money across the US.

• People started writing letters to their banks letting them know they were immoral for giving out loans to people who couldn't afford them.

What started happening to the banks who actually loaned the money to the people to buy the houses they couldn’t afford?

• The bank executives were all facing jail time for tricking people into getting home loans they couldn't afford.

• The banks started failing because they told their customers they didn't have to make the payments because they knew they couldn't afford them.

• The banks were making a lot of money on selling all the homes they repossessed.

• The banks started failing because so many people were not making their loan payments and the whole economy started falling apart.

What was the trigger that suddenly made people unable to afford to make the mortgage payments on their home?

• The Federal Reserve raised the interest rate from 1% to 2% and people were so mad they refused to make their loan payments.

• The Federal Reserve lowered the interest rate and too many people got loans.

• The Federal Reserve raised the interest rate from 1% to 6% and some people's house payments more than doubled.