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(21/04) Mscfe 660 Case Studies in Risk Management (C20-S1) Module 5: The 2008 Global Financial Crisis Practice Quiz M5 (Ungraded)

The document is a practice quiz reviewing key concepts from Module 5 on the 2008 global financial crisis. It contains 5 multiple choice questions about how increases in interest rates led to homeowner defaults, the effect of mass defaults on mortgage-backed securities, the difference between collateralized debt obligations and mortgage-backed securities, the concept of a liquidity trap, and how anti-predatory loan legislation could have helped mitigate the subprime mortgage crisis. The quiz is ungraded and provides feedback on whether answers are correct or incorrect.

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Abdullah Abdullah
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177 views

(21/04) Mscfe 660 Case Studies in Risk Management (C20-S1) Module 5: The 2008 Global Financial Crisis Practice Quiz M5 (Ungraded)

The document is a practice quiz reviewing key concepts from Module 5 on the 2008 global financial crisis. It contains 5 multiple choice questions about how increases in interest rates led to homeowner defaults, the effect of mass defaults on mortgage-backed securities, the difference between collateralized debt obligations and mortgage-backed securities, the concept of a liquidity trap, and how anti-predatory loan legislation could have helped mitigate the subprime mortgage crisis. The quiz is ungraded and provides feedback on whether answers are correct or incorrect.

Uploaded by

Abdullah Abdullah
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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4/27/2021 Practice Quiz M5 (Ungraded)

My courses ▶ (21/04) MScFE 660 Case Studies in Risk Management (C20-S1)


▶ Module 5: The 2008 Global Financial Crisis ▶ Practice Quiz M5 (Ungraded)

Started on Tuesday, 27 April 2021, 8:36 PM


State Finished
Completed on Tuesday, 27 April 2021, 8:38 PM
Time taken 2 mins 31 secs

Question 1
Complete

Not graded

Why would the FED's increase in interest rates lead homeowners to default?

Select one:
Many homeowners had adjustable-rate mortgages which meant payment
became unaffordable as interest rates increased
They wanted to remortgage their homes as interest rates increased
They thought investing in bonds would be a better way to spend their
money

None of the above

Your answer is correct.

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4/27/2021 Practice Quiz M5 (Ungraded)

Question 2

Complete

Not graded

What effect would mass defaults by homeowners have on the value of the
collateral for MBS's?

Select one:
The value of the properties would decrease as supply increases
The value of the properties would decrease as supply decreases
The value of the properties would increase as supply increases
The value of the properties would increase as supply decreases

Your answer is incorrect.

Question 3
Complete

Not graded

What is the primary difference between a CDO and MBS?

Select one:
They are just different names
They are issued by different organizations
CDO are a type of MBS which has tranches with different payment
characteristics
One is traded Over-the-Counter while the other is listed

Your answer is correct.

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4/27/2021 Practice Quiz M5 (Ungraded)

Question 4

Complete

Not graded

What is a Liquidity Trap?

Select one:
The steep point on the Liquidity Preference Curve which renders
Monetary Policy most effective, as change in Money Supply has large effects
on interest rates
A attening of the Liquidity Preference Curve which renders Monetary
Policy impotent, as change in Money Supply has limited effect on interest
rates
A state in the economy in which banks have very little liquidity and so are
trapped from issuing new assets
None of the above

Your answer is correct.

Question 5

Complete
Not graded

In what way would anti-predatory loan legislation have helped the subprime
mortgage crisis?

Select one:
Predatory land developers wouldn’t have been able to expand their
projects so aggressively.
The expansion of the property market into the nancial sector would have
been curtailed.

It would have ensured banks and investment institutions followed due


diligence on people getting loans.
It would have prevented loans to predatory real estate dealers and
property developers.

Your answer is correct.

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4/27/2021 Practice Quiz M5 (Ungraded)

◄ Notes 4 M5
Jump to...

Live Session M5 ►

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