EBK PRINCIPLES OF MICROECONOMICS
11th Edition
ISBN: 8220100792908
Author: Fair
Publisher: YUZU
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Chapter 11, Problem 14P
To determine
The economic justification for the higher interest rates.
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Lending institutions charge different interest rates for different classifications of mortgages. Two of these mortgage types are Alt-A mortgages and subprime mortgages. Alt-A mortgages generally carry a higher interest rate than a typical “prime rate” mortgage, and subprime mortgage rates are generally even higher than Alt-A rates. What is the likely economic justification for the higher interest rates for these two types of mortgages?
Subprime mortgages are O mortgages issued to borrowers with flawed credit histories. government-backed mortgages issued by Fannie Mae and Freddie Mac. mortgages issued to borrowers who fail to document that their incomes are high enough to afford their mortgages. mortgages which are bundled together by financial institutions and sold to investors.
Which of the following statements about adjustable-rate mortgages is TRUE? Interest rates can't change over the life of the mortgage. Adjustable-rate mortgages are especially attractive to high-income buyers. Adjustable-rate mortgages usually have interest rates lower than market rates during the first year. Adjustable-rate mortgages are more attractive when interest rates on fixed mortgages fall.
Chapter 11 Solutions
EBK PRINCIPLES OF MICROECONOMICS
Ch. 11.A - Prob. 1PCh. 11.A - Prob. 2PCh. 11.A - Prob. 3PCh. 11.A - Calculate the present value of the income streams...Ch. 11.A - Prob. 5PCh. 11.A - Prob. 6PCh. 11.A - Prob. 7PCh. 11.A - Prob. 8PCh. 11.A - Prob. 9PCh. 11.A - Prob. 10P
Ch. 11.A - Prob. 11PCh. 11.A - Prob. 12PCh. 11 - Prob. 1PCh. 11 - Prob. 2PCh. 11 - Prob. 3PCh. 11 - Prob. 4PCh. 11 - Prob. 5PCh. 11 - Prob. 6PCh. 11 - Prob. 7PCh. 11 - Prob. 8PCh. 11 - Prob. 9PCh. 11 - Prob. 10PCh. 11 - Prob. 11PCh. 11 - Prob. 12PCh. 11 - Prob. 13PCh. 11 - Prob. 14PCh. 11 - Prob. 15PCh. 11 - Prob. 16PCh. 11 - Prob. 17PCh. 11 - Prob. 18P
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