The widely publicized subprime lending crisis was NOT caused by
Q: Discuss how the national credit act treats reckless trading
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A: Loans are raised by governments to meet the financing requirements of the country.
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Q: Would you not agree that the financial institutions and federal authorities are equally to blame for…
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Q: How has the credit crisis May have adversely affected many homeowners and mortgage companies?
A: Homeowners insurance policies are defined as the type of an insurance policies, which usually covers…
Q: What went wrong with Subprime mortgages?
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A: Banks are the financial institutions that are involved in providing financial services to their…
Q: When any central bank wanted to increase the money supply and loosen credit conditions, what would…
A: In order to increase the money supply and loosen credit conditions, the central bank would purchase…
Q: he purpose of the inflation premium is to maintain the purchasing power of money while it is loaned…
A: a) An inflation premium is added to interest rates for compensating for expected inflation by…
Q: Why are the banks reluctant to lend, and what should be done to increase bank lending?
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Q: Why is the Fed’s discount window considered the “lender of last resort” for some banks?
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A: Mortgages are important for the growth of real estate and growth of economy but proper regulations…
Q: When referring to the Federal Reserve System, what is meant by the "Lender of Last Resort?"
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A: Paycheck Protecting Program: It is the program launched to protect the salary of employees being…
Q: Give reasons why governments bail out banks during an economic crisis
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A: Bank regulation is a form of government regulations which subjects banks to certain requirements,…
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A: The term “Default” in terms of a loan refers to the failure of repayment of the loan by the borrower…
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A: A Moral hazard occurs when one party tends to behave in the riskiest manner if it is protected…
Q: Commercial banks are often restricted by Central banks to hold sufficient capital. Why is such a…
A: A commercial bank may be a financial institution that accepts deposits, provides bank account…
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- Market risk is defined as the risk: Question 1Answer a. Incurred by granting loans to companies that do not hold a large market share. b. Incurred in the trading of assets and liabilities due to changes in interest rates, exchange rates and other asset prices. c. That a sudden surge in liability withdrawals may require FIs to liquidate assets at less than fair market prices. d. That an FI loses market share.Balance Sheet Insolvency occurs when Liabilities are greater than the Assets resulting in negative capital equity. For a Financial Institution, Insolvency Risk can be defined as the risk that there is insufficient capital to offset either a decrease in the market value of assets relative to liabilities or an increase in liabilities relative to the market value of assets. A. Describe a situation where Insolvency Risk could be caused one of the many risks that a Financial Institution may face. B. Describe the best protection against insolvency risk at a Financial Institution.QUESTION Hedging is a risk management strategy that is used in limiting or offsetting probability of loss from fluctuations in the prices of commodities, currencies, or securities. In effect, hedging is a transfer of risk without buying insurance policies. REQUIRED: Discuss the importance of hedging to the financial risk manager Are there any downside to hedging?
- Which of the following is not an example of a mitigating factor that reduces the risk that the going concern assumption may be in doubt? a. The ability to raise additional funds via borrowings b. A letter of guarantee from a parent company c. The ability to sell an unprofitable segment of the business d. Significant rapid increase in competitionWhich is not a management practice for reducing the problems of adverse selection and moral hazard in insurance? O deductibles. O restrictive provisions. O reinsurance. O limiting conditions. none of these answers. Question 30 Banks do not want to hold too much capital because O they want to minimize the costs of bank failures. O Nigher returns on equity are earned when bank capital is smaller. O Nigher capital levels attract the scrutiny of regulators Otwo of the answers none of these answershich one is not an incentive for a bank to Securitize its mortgage loans? A) Reduce insurance premium paid to FDIC B Meet the regulations on equity capital adequacy Increase the duration of the bank's asset portfolio D Reduce the bank's illiquidity exposure
- Finance What are the major instruments traded in capital markets? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Do not provide Excel Screet shot rather use tool table Answer completely.Which of the following statements is false? The cost of debt securities is highest due to their relatively low risk The cost of common stock is highest due to its relatively high risk The cost of preferred stock falls somewhere between debt and common stock None of the above Capital budgeting is the decision making process used in the acquisition of long term physical assets True False Which of the following statements are true regarding the payback period of an investment? It does not account for the time value of money No objective criteria exists for what is an acceptable payback period Cash flows occurring after the payback period have no impact on the payback computation All of the above The method that measures a projects return based on present values is the: Internal Rate of Return Discounted Payback Period Modified Internal Rate of Return None of the Abovenvestment banks may lose ________ if new securities issues are ________. future business; undersubscribed large amounts of money; oversubscribed future business; oversubscribed large amounts of money; fully subscribed
- The advantage of risk-sharing of financial institutions is Select one: reduced liquidity reduced return reduced liability reduced diversification None of the answers are correct Clear my choiceMoral hazard or its reduction explain the following except: O A. Collateral requirements for loans. O B. The Enron and Tyco scandals. O C. The success of zero commission trading. O D. Covenants requiring borrowers to provide information periodically.Which of the following is false regarding the secondary market? a) Secondary markets provide the necessary liquidity to the market b) transactions in the secondary market affect the total component of financial assets that exist in the economy c) The secondary market represents trading in already existing financial claims d) secondary markets reduce the risk of investing in financial claims