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LOS b: Illustrate how the default rate on a 2/28 adjustable rate subprime mortgage changes as debt creation journeys from conservative hedging activities, to more speculative activities, and finally to a Ponzi scheme phase.
Q1. According to the concept of liquidity and its measure of the “appetite for risk”, which of the following would be apt to have the highest level of liquidity in the economy?
A) Ponzi unit.
B) Hedge unit.
C) Speculative unit.
Q2. With respect to the Minsky framework, if a given period is characterized by a dramatic increase in the 2/28 adjustable rate subprime mortgages and their default rate, this would best be explained by:
A) a long period of economic stability immediately before the period.
B) economic instability right before the period.
C) a very brief period of economic stability immediately before the period.
Q3. With respect to the Minsky framework, an increase in the proliferation of 2/28 adjustable rate subprime mortgages would most likely be associated with which of the following phases?
A) Ponzi unit.
B) Hedge unit.
C) Speculative unit.
Q4. In the journey of subprime mortgages from conservative hedging activities, to more speculative activities, and then to a Ponzi scheme phase, the point of distinction between the speculative activities and Ponzi scheme phase concerns:
A) property values.
B) interest rates.
C) mortgage terms. | 
发表于 2009-3-16 17:34
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