The chartering process is especially designed to deal with thereduce the problem.O adverse selection: adverse selectionO adverse selection; moral hazardO moral hazard; adverse selectionO moral hazard; moral hazardO none of these answersproblem, and regular bank examinations help to

Financial health refers to the overall well-being and stability of an individual, organization, or…

Answered: The chartering process is especially…

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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One example of moral hazard in finance industry is "insurance policies often decreases incentive to take care of possession of its customers". How should people mitigate this problem?
One problem facing insurers is that there is a risk that a person will act differently if he/she does not bear all of the consequences of his/her actions. For instance, people with auto insurance policies may drive less carefully than they would drive if they were going to have to pay the full amount of any damages they caused/created. This problem is known as: A. Adverse selection B. Consumer deception C. Moral hazard D. Insurance fraud
Please explain adverse selection problem using an example from banking
Insurance planning is important to protect a person from an unforeseen event like premature death, disability, illness, property loss, liability or unemployment. However, conventional insurance is prohibited in the Shariah because _____ a. It involves conventional investment planner. b. It is against the faith of destiny (qada wa qadar) that everything is decided by Allah the almighty c. It involves uncertainty (gharar) in the transaction
Who will shoulder the costs of delinquency sale? a. issuing corporation b. highest bidder c. lowest bidder d. delinquent subscriber
Pls Briefly explain these four. 1. The process of assessing overall risks can be difficult and balancing resources to mitigate between risks with a high probability of occurrence but lower loss versus a risk with a high loss but lower probability of occurrence can often be mishandled. Ideal risk management should minimize spending on manpower or other resources and at the same time minimize the negative effect of risks. 2. DEFAULT RISK - is related to the probability that some or all of the initial investment will not be returned. The degree of default risk is closely related to the financial condition of the company issuing the security and the security's rank in claims on assets in the event of default or bankruptcy. 3. LIQUIDITY RISK - is associated with the uncertainty created by the inability to sell the investment quickly for cash. An investor assumes that an investment can be sold at the expected price when future consumption is planned. As the investor considers the sale of…
Credit Ratings Agencies face a moral hazard based on their Issuer-Par business model. Why is this so? Also show at least 2 examples of this.
Bank can be a source of short-term funding in terms of credit card applications. These fundings on credit cards make sure that regular payments should be made. Group of answer choices True False
True False Underwriters are persons or institutions to whom the proceeds of the policy are paid if a loss occurs.
What is moral hazard and analyze its relation to the Central Bank
Which is NOT one area that a credit counselor may be certified? consumer credit O money and debt management O real estate budgeting
All qualified plans must have fiduciaries who must act in the best interests of the plan participants and their beneficiaries. Which of the following is a breach of fiduciary responsibilities? Select one: a. Making a bad investment based on professional advice and conducting appropriate due diligence. b. Making sure the plan investments are diversified. c. Making decisions in the interest of the plan sponsor. d. Paying for educational seminars that are reasonable in cost and substantiate attendance in a high percentage of presentation sessions.

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The chartering process is especially designed to deal with the reduce the problem. O adverse selection: adverse selection O adverse selection; moral hazard O moral hazard; adverse selection O moral hazard; moral hazard O none of these answers. problem, and regular bank examinations help to