finance assignment 56

Assignment:

The questions below relate to the Module lectures. Please type all short answer responses.Responses to questions requiring calculations should be typed or neatly hand-written.

  1. What are agency problems?List three mechanisms that can mitigate agency problems?
  2. How does Sarbanes-Oxley improve the quality of information in the markets?
  3. What is the difference between asset allocation and security selection
  4. If you believe that there is “no-free lunch” in investing, are you more likely to hire an active or passive manager to oversee your portfolio? Why?
  5. What is securitization of mortgages? What was a key change in securitization precipitated the financial crisis?
  6. Moral hazard is a situation where people tend to take greater risk because the costs will not be felt by the party taking the risk. Explain the moral hazard in banks that securitize sub-prime mortgages they underwrite vs. holding onto the loans?
  7. What is the TED spread and what does it imply about market risk? Why does it rise during periods of market turmoil?
  8. What does it mean that securities are fungible and negotiable? Why are stocks fungible but not used cars built in the same year and have the same features?
 
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