A financial institution is permitted to use leverage up to a maximum debt to equity ratio of 20. Currently the bank finances its $ 100 of assets with $10 of equity.
Managers will likely receive a margin call if asset value falls to 95. true or false why ?
We learn from Gary Gorton’s book that asset-backed securities created by means of the securitization process were used as collateral for short term borrowing. true or false ?
New Century Financial relied heavily on the REPO market for funds used to originate mortgages. true or false?
The following quote from the 10-K filed by Bear Stearns and Company for the fiscal year ending November 30, 2007 indicates that the financial services industry values people with the following characteristics: competent, well trained, motivated and disciplined.
“There is intense competition in the financial services industry for qualified employees. In addition, we face increasing competition with businesses outside the financial services industry, such as hedge funds, private equity funds and venture capital funds, for the most highly skilled individuals. Our business could be adversely affected if we are unable to attract new employees and retain and motivate our existing employees.” true or false?
According to the FCIC report, New Century Financial used the Federal Reserve discount window to raise the capital it needed to finance the origination of mortgages. True or false?