Why would investors buy securities that contain bad commercial real estate loans? A. Inaccurate rating agency judgements may cause investors to buy securities containing bad loans. B. Investors might buy securities containing bad loans if they are risk "enthusiasts." C. Investors might buy securities containing bad loans if securities are misrepresented. D. All of the above. E. Only A and C are plausible.
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- 4. Which is incorrect about financial securities? a. Financial securities are guarantees the holders in terms of their claims. b. Financial securities give stable financial return and safer environment to investors. c. Financial securities are utilized by firms to generate capitalization for firms or the government. d. Financial securities are regulated by the government to protect the investing public. e. All of the above f. None of the aboveWhat does it mean to say that an investor is risk-averse? Select one: a. The greater the return from an investment, the greater the risk demanded by the investor. b. The investor would invest in government bonds but would never invest in the share market. c. The investor will avoid risk at all costs. d. None of the above. Clear my choiceWhy is it important that in an underwriting the investment banker does not overvalue (overprice) or undervalued (underprice) the securities? If the securities are overpriced or underpriced, who suffers the loss? Discuss with illustrations.
- Why is it important that underwriting the investment banker does not overvalue (over price) or undervalued (under price) the securities? If the securities are overpriced or underpriced, who suffers the lost? Discuss with illustrations.Why is it important that in an underwriting the investment banker does not overvalue (overprice) or undervalue (underprice) the securities? If the securities are overpriced or underpriced, who suffers the loss?A. Briefly explain the problem of moral hazard in: (i) Equity financing (ii) Debt financingB. What is the adverse selection problem in financial markets and how can it be solved?
- according to principles of behavioural finance, which statements is True? a) investors always behave in rational manner b) investors have tendency to become overconfident c) investors never make decisions based on psychological bias or emotions d) investors overestimate the risk of given situation to err on the side of safety.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.
- The theory is based on the notion that investors act rationally and consider all available information in the decision-making process, and hence investment markets are efficient, reflecting all available information in security prices. This describes Select one: a. conventional finance. b. irrational investors. c. behavioral finance. d. cognitive errors. e. None of the these1) What would happen to the standard of living in the United States if people lost faith in our financial markets? Why? 2) How does a profitable capital market help reduce the prices of goods and services? 3) The SEC attempts to protect investors who purchase newly issued securities by requiring issuers to provide relevant financial information to potential investors. The SEC does not provide an opinion on the actual value of the securities.Therefore, a reckless investor could pay too much for some shares and consequently lose a lot. Do you think the SEC should, as part of each new offering of stocks or bonds, give investors an opinion on the appropriate value of the securities being offered? Explain1. Which of the following statements is false? a. Risk neutrality means that an investor are not looking at risk in an investment, just returns. b. Risk aversion means that an investor prefer a fixed amount with certainty over a larger amount with risk. c. Risk seeking means that an investor is willing to accept the higher risk that goes with higher payoff. d. All of the above are false. e. None of the above are false.