When is taking out a subprime loan to buy a house most likely to be a reasonable financial decision?
A) Qualifying for a conventional loan is impossible.
B) Owning a home is an important life goal for the borrower.
C) Adjustable rates are likely to be higher than fixed rates.
D) The borrower reasonably expects to have greater financial means in the near future.
E) The previous owner of the house took out a subprime loan.
Answer: D
Explanation: D) Can a subprime loan ever be a good idea? Sure. If you need a subprime loan because you can't qualify for a conventional one, then you're probably a high-risk buyer. But if you're about to come into more money in the near future, Choice D, then it might be worth getting a bad rate now if you reasonably think you'll be able to afford it later. Choice A: Not being able to get a regular loan doesn't mean that a subprime loan is a good idea. Maybe you really can't afford it. Choice B: Wanting a house desperately isn't a reason to take out a high-interest loan. Choices C and E tell us nothing about the buyer and his or her ability to pay.
You might also like to view...
A promissory note is executed in June. When the note is paid the following January, the payee's entry includes (assuming a calendar-year accounting period and no reversing entries) a
a. debit to Interest Income. b. credit to Cash. c. credit to Interest Receivable. d. debit to Notes Receivable.
The long-run average cost (LRAC) curve indicates the ________
A) per unit cost of output in the long run B) projected total production costs of competitors C) variable costs incurred by a firm over time D) fixed costs incurred by a firm over the long term E) number of units the market will buy in a given time period, at different prices that might be charged
Grant is running his usual weekly report in connection with this current project. Today, he notices that the numbers are very different from their normal range. Because variance in the numbers usually means there is some issue with cash flow, Grant takes the report to his supervisor for assistance. Grant’s decision to involve his supervisor is an example of ______.
a. observation b. the exception principle c. special reports d. audits
Concern with introversion vs. extroversion is associated with ______________ fit.
A. ability-job B. personality-job C. person-organization D. personality-ability E. interest-organization