Multiple Choice
A lien that only binds to a specific asset or property is known as what type of liability?
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9. Current Liabilities
Types of Liabilities
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If a homeowner can no longer pay the home loan, the lender will likely _____ on the property.
A
amortize
B
foreclose
C
depreciate
D
capitalize
Verified step by step guidance1
Understand the context of the problem: The question is asking about the action a lender takes when a homeowner cannot pay their home loan. This is related to financial and legal processes in lending.
Clarify the terms provided in the options: 'Amortize' refers to spreading out loan payments over time, 'Foreclose' refers to the legal process where a lender takes ownership of the property due to non-payment, 'Depreciate' refers to the reduction in value of an asset over time, and 'Capitalize' refers to recording an expense as an asset.
Focus on the term 'foreclose': Foreclosure is the correct term in this context because it directly relates to the lender's action of taking ownership of the property when the homeowner defaults on the loan.
Eliminate incorrect options: 'Amortize' does not apply because it refers to payment schedules, 'Depreciate' is about asset value reduction, and 'Capitalize' is about accounting treatment of expenses.
Conclude that the correct answer is 'foreclose' based on the definition and relevance to the scenario described in the problem.
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