Unit 3 Discussion

List three different ways that a risk-averse person can reduce financial risk.

Moral hazard is a costly behavior because the insured party acts riskier than they would normally, knowing that they’re covered, and insurance companies allow it because they can sell more policies in addition to receiving bailouts from the government.   It is natural for moral hazard to happen, but its effects can have consequences. This was seen during the 2007–2008 financial crisis on Wall Street that later led to the Great Recession.   Because interest rates were at an all-time low, credit was incredibly cheap, and borrowing money was easier than ever. Borrowers rushed to buy homes, including those who could not previously afford it. Money lenders approved loans and sold them to banks, which were marketed and sold as low-risk investments. The loans were then sold to investors who were looking to make an easy profit.   The U.S. Federal Reserve then increased interest rates as the economy was recovering, but as a result, the housing market crashed because people were unable to make…

Explain how accounting is used to track and monitor economic events that impact capital markets

One of the biggest problems for any economy is to figure out how to get or transfer money from people or firms who want to save (savers) to people or firms who want to borrow (investors). Explain how financial markets can help to solve this problem efficiently. Discuss how financial markets function and which tools they can offer to solve this problem. Discuss how financial systems are of crucial significance to adequate capital formation, which is indispensable to a speedy economic growth and development.

True or false When financial intermediaries deleverage, firms cannot fund investment opportunities resulting an increased opportunity for growth.

Alistair Byrne and Stephen P Utkus stated that Behavioural FinanceSelect one:a. is a part of finance that seeks to understand and explain the systematic financial market implications ofpsychological decision processes. b. encompasses research that drops the traditional assumptions of expected utility maximization with rationalinvestors' inefficient markets.c. is the study of the influence of psychology on the behavior of financial practitioners and the subsequenteffect on the markets.d. is an extension of behavioral economics, which uses psychological insights to inform economic theory.e. studies the psychology of financial decision-making.

Do you believe that Simple Linear Regression (SLR) plays a vital role in the modernworld? How do some companies use SLR to assess financial risk?

Your niece just started her college career with a major in economics. She is curious as to the interrelationship between the success of an economy and the financial markets, concepts, and financial institutions. Accordingly, she has developed a list of questions addressing these issues and has asked that you explain the ideas. What are the financial markets and what purposes do they serve? What are financial intermediaries? How do these intermediaries function in the economy? What is a federal government budget deficit? What is the national debt? How does a budget deficit affect the economy? She is also curious about the time value of money concepts. Specifically, she has the following questions about these concepts: Why are consumers considered to be risk averse? What methods could be used to deal with risk? It has been said that a dollar received today is worth more than a dollar received tomorrow. What does this mean and what is the significance to the economy? What is the…

With the biting economy and dwindling levels of income, many Microfinance clients have been affected and so MFIs are likely to experience low business and high defaults. As the CEO of the MFI in question, explain the measures you will take to tackle this challenge

Which of the following is NOT typically a role for a financial intermediary...? make public financial statements of borrowers evaluate the riskiness of lending to borrowers pool funds from lenders monitor the financial conditions of borrowers

Which of the following is not a key dimension of financialization?   Private equity   Profits via the global sale of goods and services   Public sector budget austerity   Share price maximization

discuss why people working in the finance industry might make unethical decisions.please give a example

Use the scenario to answer the following question. Bryan has applied for a mortgage with Bank of America. The bank is reviewing the amount of Bryan's monthly income that is used to pay his monthly debt to determine the level of risk in offering him a mortgage. Which of the following concepts characterizes the basic components of a credit score being utilized by the bank? A- payment history B- debt-to-income ratio C- available credit D- length of credit history

Q. 4   Suppose you, owner and CEO of a corporation, are considering a $25 million project that constructs a building in the downtown area of Toronto. The current market price of the similar building is about $20 million. The future price is uncertain. It may be either $28 million or $22 million in one year from now, depending on the economic situation. The company can borrow at a risk-free rate of 5 percent per year. What is the value of this project? Use a binomial model to value this real option.

What effect might a fall in stock prices have on businessinvestment?

Explain the role that financial intermediaries play in an economy by giving a practical example.

What distinguishes a primary stakeholder's worries from a secondary stakeholder's?

All the investment vehicles that you can use in your investment plan are traded in the securities markets in the form of stocks, bonds, and other financial instruments. There are physical places such as the NYSE (New York Stock Exchange) or the electronic networks such as NASDAQ (National Association of Securities Dealers Automated Quotations) where investors trade these securities. Securities markets can be divided into primary and secondary markets. When securities are bought and sold by investors who did not originally purchase the issued security, the transactions take place in the     market.   Within the arena of security trading, the secondary market plays an extremely important role. The secondary market can be divided into the broker market and dealer market. For each of the following statements, indicate by checking the appropriate boxes, whether each statement is true of broker markets, dealer markets, both markets, or neither market.     Broker Dealer…

Review the concept of value at risk (VaR) in chapter 5. Evaluate the following two cases and decide which of the two situations would be less risky using VaR.   1. You are unemployed and are thinking about using your life savings of $10,000 to start a new business. 2. You have a full-time job paying $80,000 per year and are considering making a $1,000 investment in the stock of a well established, stable company

Discuss the effects of COVID 19 Pandemic to financial markets and institutions in Malaysia.

John owns and runs a food truck, which he expects to increase his wealth to $40,000 this year. John knows that every year, there is a 20% chance that his truck will be firebombed by one of his ruthless food truck competitors. If this happens, he will face a bill of $10,000 in repairs and lost income. John can choose to get insurance to cover all repair costs and lost wealth. Use this information and the information in the table and graph to answer the questions. Total utility Wealth Total utility (utils) 730 1000 $32,000 900 $34,000 755 800 700 $36,000 785 600 792 500 $38,000 400 300 200 100 0 $5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000 55,000 Wealth What is John's expected wealth? expected wealth: $ What is the price for John's insurance? price of insurance: $ What is John's expected utility without insurance? expected utility: 730 If John chooses to pay the insurance policy price, what would be his total utility? total utility: 1030 42000 10000 utils utils