Many investors that purchased the mortgage-backed securities just before the credit crisis believed that they were misled, because these securities were riskier than they were misled, because these securities were riskier than they thought. who is at fault?

1) If borrowers with the most risky investment projects seek bank loans in higher proportion to those borrowers with the safest investment projects, banks are said to face the problem of A) adverse credit risk. B) adverse selection. C) moral hazard. D) lemon lenders.

When close to the zone of insolvency, managers have an incentive to gamble. This is known as    Question  options:   a)  an agency cost of debt that covenants cannot attenuate   b)  an agency cost of equity known as fraudulent conveyance    c)  an agency cost of debt that negative covenants can attenuate   d)  an agency cost of debt that positive covenants can attenuate

What is a financial market? What is the role of a financial market? 3-2 What would happen to the standard of living in the United States if people lost faith in our financial markets? Why? 3-3 How does a cost-efficient capital market help to reduce the prices of goods and services? 3-4 The SEC attempts to protect investors who are purchasing newly issued securities by requiring issuers to provide relevant financial information to prospective investors. The SEC does not provide an opinion about the real value of the securities. Hence, an unwise investor might pay too much for some stocks and consequently lose heavily. Do you think the SEC should, as a part of every new stock or bond offering, render an opinion to investors on the proper value of the securities being offered? Explain.

All of the following may be considered causes of the “dark side” of credit except: Group of answer choices B. Operational issues that affect credit assessments can have a systematic effect on the whole consumer portfolio. D. Historical data tends to be consistent and can lead to accurate forecasts. A. Tendency of consumers to default is a product of changing legal and social systems. C. Sharp changes in the economic environment, such as a deep recession.

Analysts and theorists have debated over the different factors that caused the subprime mortgage meltdown. According to your understanding of the crisis, which of the following factors led to the financial crisis? Check all that apply. A. Real estate appraisers and rating agencies were lax B. Credit default swaps clamied to insure CDOs C. The Fed kept interest rates low to encourage home ownership D. investors were fully aware of the risks involved, yet still settled with low returns.

Financial assets such as mortgages, credit cardreceivables, and auto loan receivables are oftenbundled up, placed in a bank trust department,and then used as collateral for publicly tradedbonds. Bond prices typically rise when interestrates decline, but bonds backed by mortgagesfrequently fall when rates decline. Why might thishappen?

Investment Banks operate and earn profits by:   a) Purchasing undervalued securities on the market   b) Creating and marketing new financial securities for issuers.   c) Underwriting existing security issues, and selling them at a discount.   d) Issuing stocks and bonds based on their own credit.   e) Purchasing and reselling existing undervalued stocks and bonds.   f) None of the other answers.