Created the possibility of moral hazard for large banks

Assignment Help Financial Management

Reference no: EM131930338

1. The "Too big to Fail" policy has created the possibility of a moral hazard for large banks. The cause of this moral hazard is related to:

a. The incentive to assume high risk without taking the full implications of the risk taking

b. The presence of deposit insurance guarantee from the federal government

c. the back of market discipline for holders of bank securities when the bank is engineered in high risk taking behavior

d. all of the above

2. What is the expected return on an equally weighted portfolio of these three stocks? state of economy Boom Bust Probability of state of economy 0.64 0.36 rate of return if state occurs Stock A 0.19 .15 Stock B 0.13 0.11 Stock C 0.31 0.17.

A) 19.67 percent

B) 18.60 percent

C) 20.48 percent

D) 16.33 percent

E) 21.33 percent

Reference no: EM131930338

Questions Cloud

According to the gap model : According to the gap (repricing) model, what will happen to net income if interest rates increase by two percentage points?

Draw a flowchart showing the experimental process : Draw a flowchart showing the experimental process. How to obtain experimental results? Will you measure temperature on site or simulate the temperature

Define changes in the firm and in the environment : What changes in the firm and/or in the environment might cause a firm to abandon the functional approach?

What is the limitation in using variance as measure of risk : What is the limitation in using variance as measure of risk? Explain this point with an illustration.

Created the possibility of moral hazard for large banks : The "Too big to Fail" policy has created the possibility of a moral hazard for large banks. The cause of this moral hazard is related to:

Considered use of cash in cash flow statement : Which of the following is considered a use of cash in a cash flow statement??

Transactions will not affect the quick ratio of company : Which of the following transactions will not affect the quick ratio of a company?

Discuss the benefits gained by adopting a matrix : Firms differ, often substantially, in their organizational structures even within the same industry. What accounts for the differences in their approaches?

The customer at the end of the three month period : What will be the total amount due the customer at the end of the three month period?

User Account

All Pages