Financial Risk Manager Part 1
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A junior risk analyst has been assigned the job of summarizing the factors that contributed to the financial crisis of 2007-2009, with a specific emphasis on the impact of subprime mortgages. Which of the following statements precisely describes the role or effect of subprime mortgages in the period leading up to the crisis?
A junior risk analyst has been assigned the job of summarizing the factors that contributed to the financial crisis of 2007-2009, with a specific emphasis on the impact of subprime mortgages. Which of the following statements precisely describes the role or effect of subprime mortgages in the period leading up to the crisis?
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A
Strict documentation requirements for new borrowers resulted in a liquidity crisis for real estate due to a lack of qualified borrowers.
4.8%
B
Initial loan-to-value ratios steadily decreased for new subprime borrowers in the years leading up to the crisis.
13.5%
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