Which of the following is NOT an exampleof a social cost of financial markets?InflationA self-taught high school studentlearning to invest loses asignificant amount of money frombuying a stock with hiddentransaction fees.Banks selling poor qualitymortgages in the USA can lead toa global recessionManager may have higher/lowerrisk appetite than owners

The social cost of financial markets refers to the negative consequences or externalities that can…

Answered: Which of the following is NOT an…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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As a bank manager, you conclude that the bank has a capital shortfall and should decrease the equity multiplier (i.e., increase the capital ratio) to prevent bank failure. Which of the following is one of things you can do to manage capital adequacy of the bank? a.Acquiring more reserves through borrowing from fed funds loansb.Selling the bank's holding of mortgage-backed securities and using the proceeds to decrease liabilitiesc.Repurchasing shares of the bankd.Increasing dividend payout ratio to reduce retained earnings.
The "mark to market" rule (a) Created an unrealistic picture of the financial health of some banks. (b) Required banks to recognize in their balance sheet decrease in value of assets as their price declined in the market, instead of waiting until the asset was sold. (c) Caused the net worth of some banks to decline significantly and making it impossible for the banks to make loans. (d) All the above. (e) Only (b) and (c) are true.
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.
Payday loans are one of the most insidious business practices, and their customers seem to end up with a payday ball and chain around their neck that never seems to go away. This is because the interest and fees associated with these loans are so high that many people get trapped into taking one after the other over and over again. Rarely do payday loans end up being the short-term solution they claim. On the business front, there are working capital loans. Do you think that these are a good idea and a valid solution to help manage working capital, or do you think that these are the business equivalent of payday loans?
who are the guardians of finance and did they play a role in the housing boom and bust, and subsequent severe recession?
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.
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.
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.

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