What role does executive compensation play in risk-taking and accountability? Why do some people partially blame compensation for the failures of the subprime mortgage and financial industries in 2008-2009?
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What role does executive compensation play in risk-taking and accountability? Why do some people partially blame compensation for the failures of the subprime mortgage and financial industries in 2008-2009?
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- Risk premiums on corporate bonds are usually anticyclical; that is, they decrease during business cycle expansions and increase during recessions. Why is this so?Explain why emerging market economies is important in financial markets?Bankruptcy of Lehman Brothers on September 15, 2008 was a historical event that became symbol for the Global Financial Crisis (GFC) leading to one of most severe economic downturns at the global level since Great Depression. Which factors do you think were the most important ones in creating GFC?
- Which of the below statements is false for frictionless financial markets? A.No transactions costs B.No corporate and personal taxes C.No agency costs between shareholders and debtholders D.Information asymmetry between managers and investorsThere is a growing concern among tax payers that ‘too big to fail’ (TBTF) creates moral hazard problems and leads to excessive risk-taking and reckless investment decisions by large financial institutions. This unfortunately exposes the tax payer and the economic system to excessive cost. What are the issues surrounding “too big to fail”? Is it possible for the legislative authority to simply “outlaw” TBTF institutions? Why or why not?True or false When financial intermediaries deleverage, firms cannot fund investment opportunities resulting an increased opportunity for growth.
- Explain how accounting is used to track and monitor economic events that impact capital marketsWhat is a financial bubble in the context of asset markets? A. A situation where asset prices are stable and reflect intrinsic value B. A sudden and unsustainable increase in asset prices followed by a crash C. A government policy to regulate asset markets D. A situation where asset prices are controlled by a single entityExplain the ways in which financial institutions manage credit risk.
- Explain the role of financial innovation and the role of regulation in the generation of a financial crisis.Q1: Define and differentiate between: a) Organized exchanges and Over the counter markets b) Open Ended vs Closed Ended Mutual Funds c) Moral Hazard and Adverse selection Q2: What is meant by asset transformation and how is it the basis for differentiating between indirect finance and direct finance? Q3: What are the three main reasons for regulating financial markets and institutions? Also list the major regulation examples under each of the three reasons. Q4: What value do mutual funds add for individual investors and how? Q5: Using the relevant financial securities and institutions, explain the chain of events which lead to the 2007 global financial crisis. Q6: Last year Fauji Fertilizer Company Limited (FFCL) gave an annual dividend per share of Rs. 8.85 which is expected to grow at 5%, forever. Calculate the per share price of the stock if its required rate of return is 14%? Q7: Calculate the duration of a 7-year coupon bond having a 11% coupon rate. The current market…Explain the reasons for the emergence of financial crises in the world and what measures were taken to overcome the crisis.