2008 Financial Crisis Quiz

What is the primary function of a mortgage?

• To provide financing for purchasing real estate.
• To offer investment advice for property owners.
• To provide insurance for real estate transactions.
• To facilitate rental agreements between landlords and tenants.

What does the abbreviation APR stand for?

• Adjusted Payment Rate
• Annual Percentage Rate
• Average Percentage Rate
• Annual Payment Rate

What is the difference between APR and Interest?

• APR is always lower than interest rates.
• Interest includes fees and penalties, while APR does not.
• APR is a type of interest rate that only applies to mortgages.
• APR includes interest and fees, while interest is just the cost of borrowing.

What is the main benefit of a fixed rate mortgage?

• Stability in monthly payments.
• Potential for lower overall loan costs.
• Flexibility to change payment amounts each month.
• Lower interest rates than variable mortgages.

What is the main drawback of a variable rate mortgage?

• The main drawback is the fixed interest rate.
• The main drawback is the lack of flexibility in payments.
• The main drawback is the requirement for a large down payment.
• The main drawback is the uncertainty of fluctuating interest rates.

What happens to the cost of a variable rate mortgage when the interest rate increases?

• The cost of a mortgage is unaffected by interest rate fluctuations.
• The cost of a mortgage remains the same regardless of interest rate changes.
• The cost of a mortgage increases when the interest rate rises.
• The cost of a mortgage decreases when the interest rate rises.

As a homeowner, what does 'equity' mean?

• Equity refers to the total amount of mortgage debt owed on the property.
• Equity is the amount of money a homeowner pays in property taxes each year.
• Equity is the homeowner's ownership interest in the property, calculated as the home's market value minus any outstanding mortgage debt.
• Equity is the difference between the purchase price and the selling price of a home.

Which of these can negatively affect your credit rating?

• Late payments, high credit utilization, bankruptcy, and too many hard inquiries.
• Paying bills on time
• Having a diverse credit mix
• Low credit utilization

Why would a lender class someone as a credit risk?

• A lender classifies someone as a credit risk due to poor credit history or high debt levels.
• A lender classifies someone as a credit risk based on their age.
• A lender classifies someone as a credit risk if they have no credit history.
• A lender classifies someone as a credit risk due to a high income.

What is a subprime mortgage?

• A subprime mortgage is a government-backed loan for first-time homebuyers.
• A subprime mortgage is a loan for borrowers with low credit scores, often featuring higher interest rates.
• A subprime mortgage is a loan for borrowers with excellent credit scores.
• A subprime mortgage is a type of savings account.