Deck 9: Ethical Lending and the Great Recession

Question 1

Which is a practice that borrowers choose to engage in?

A)foreclosures
B)deficiency judgments
C)strategic defaults
D)all of the above

Answer 1

C

Question 2

Payday loans carry an interest rate of

A)less than 25 percent.
B)about 50 percent.
C)about 75 percent.
D)more than 100 percent.

Answer 2

D

Question 3

Churning is the practice of encouraging investors to make multiple unnecessary trades in order to create extra income for the broker. Because it benefits a few at the expense of the many, churning violates the utility principle.

Answer 3

True

Question 4

According to the principle of duties, an action is considered moral when it respects the rights of others and immoral when it violates another's rights.

Question 5

Combining universal ethical principles with long-term thinking can help prevent unethical actions in lending.

Question 6

When many homeowners lose their homes, the effect on the community may be

A)lower property values.
B)more crime.
C)less ability to provide basic services.
D)all of the above

Question 8

Mortgage lenders played a large role in starting the "Great Recession."

Question 9

After losing a home and having it sold at auction, a homeowner can be assured that all his or her debts to the lender have been discharged.

Question 10

Charging high interest rates is an ethically sound practice according to the egoism principle.

Question 11

An average U.S. household carries _____ in credit card debt.

A)less than $5,000
B)about $5,000
C)about $7,500
D)more than $10,000

Question 12

When borrowers cannot pay, it is easier for credit card companies to recover their losses than for mortgage lenders.

Question 13

With a secured loan, such as a home loan, retaking the collateral generally ensures the lender will recover most or all of its costs.

Question 14

After the housing market collapsed, many homeowners owed more on their homes than their homes were worth because

A)they had made small down payments.
B)they had taken home equity loans.
C)home values fell sharply.
D)all of the above

Question 15

Which ethical issue in lending is described in the chapter?

A)encouraging people to borrow more money than they can afford to repay
B)charging excessively high interest rates
C)both a and b
D)neither a nor b

Question 16

At the time the chapter was written, how many U.S. homeowners owed more on their homes than the home was worth?

A)1 in 25
B)1 in 10
C)1 in 5
D)1 in 4

Question 17

For the most part, credit card companies can charge high fees, raise rates, and lower credit limits without violating the law.

Question 18

A homeowner might choose to skip mortgage payments over credit card payments because

A)credit cards are seen as more basic to survival.
B)many mortgage lenders do not seek to repossess the property immediately.
C)credit cards are often cancelled after a small number of missed payments.
D)all of the above