The financial crisis of 2008 took place because increase in housing pr

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Underlined. Thank you.

Hi, 1st of all it is always best to underline whenever you post SC question.
Coming back to your question : It is fairly meaning based question.

"increase in housing prices between 1998 and 2005 lowered the risk on mortgages that, in turn, made the return on mortgage backed securities very attractive."

something made the return on mortgage backed securities very attractive -> what is something here? (A) says "that", which is referring to risk on mortgages. But the actual meaning is that the whole previous clause actually resulted / is resulting in making return on mortgage backed securities very attractive.
So you need to find an answer option which shows the right meaning.
Only B does this.

Why A is not correct. please explain

Hi, my bit on this.

Option A uses "that" which actually acts as a pronoun in this case. Can we clearly point out what "that" if referring to? IMO use of making in option B modifies the whole clause preceding it and that is what the sentence intends to mean.

Read it as follows:
The financial crisis took place because increase in housing prices lowered the risk on mortgages, making the return on mortgage backed securities very attractive.

robu1

Option A is incorrect because there's a meaning error. The relative pronoun "that" refers to mortgages. Mortgages made the return on mortgage-backed securities very attractive. It is not the mortgages that made the return very attractive.

Option B clearly communicates the meaning of the sentence by converting the verb (made) to verb+ing modifier (making). It is lowering of risk that resulted in making MBS very attractive. Typical cause and effect scenario.

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