At the beginning of the mortgage crisis, 2006-2009 recession, some investment banks like Goldman Sachs, were allowed to change their banking charters from an investment bank to a commercial bank (like Citibank), O A. To have access to the Federal Reserve Discount Window O B. To be able to borrow money at low interest rates from the Federal Reserve Bank O C. To avoid bankruptcy O D. All of the above

At the beginning of the mortgage crisis, 2006-2009 recession, some investment banks like Goldman Sachs, were allowed to change their banking charters from an investment bank to a commercial bank (like Citibank), O A. To have access to the Federal Reserve Discount Window O B. To be able to borrow money at low interest rates from the Federal Reserve Bank O C. To avoid bankruptcy O D. All of the above

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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When firms enter into loan agreements with their bank, it is very common for the agreement to have a restriction on the minimum current ratio the firm has to maintain. So, it is important that the firm be aware of the effects of their decisions on the current ratio. Consider the situation of Advanced Autoparts (AAP) in 2009. The firm had total current assets of $1,907,570,000 and current liabilities of $1,362,550,000. a. What is the firm's current ratio? b. If the firm were to expand its investment in inventory and finance the expansion by increasing accounts payable, how much could it increase its inventory without reducing the current ratio below 1.2? c. If the company needed to raise its current ratio to 1.5 by reducing its investment in current assets and simultaneously reducing accounts payable and short-term debt, how much would it have to reduce current assets to accomplish this goal? Question content area bottom Part 1 a. What is the firm's…
The company's bank won't lend it any more money than it already has, and investment bankers have said that debentures are out of the question. The treasurer has asked you to do some research and suggest a few ways in which bonds might be made attractive enough to allow the company to borrow. Explain how to secure the bonds with owned assets in great detial. In what ways does it make the bonds more attractive to allow the company to borrow?
What is shadow banking and how does it differ from traditional retail banking? What kind of threat does shadow banking pose to the financial system? Discuss the role of shadow banking in the financial crisis of 2007-2008.
In the run-up to the 2007 – 2009 financial crises, all of these key trends undermined the health of the mortgage (and other) securitization markets except: Group of answer choices D. Banks failing to distribute securitized risk A. Risk-based pricing C. Subprime credit wrapped into complex and overvalued securities B. Subprime loans
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?

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