1. Goldman Sachs operated with 40 to 1 leverage."
This statement is consistent with which of the following:
Select one:
a. Goldman Sachs borrows 40 dollars for each dollar of capital.
b. Goldman Sachs must borrow 97.5% of total asset value.
c. Capital constitutes 2.5% of assets.
d. 2.5% loss in value would wipe out shareholder value.
e. All of the above.
2. This particular bond is considered to have no default risk.
Select one:
a. AAA rated corporate bonds
b. sovereign wealth bonds
c. zero risk bonds
d. US Treasury bonds
3. The figure above shows the interest rates (sometimes called yields) for two types of bonds: US 10-year Treasury bond and a risky corporate bond. The gap (i.e., vertical distance) between the US 10-year Treasury bond (red) and risky corporate bond (blue) lines is called:
Select one:
a. risk premium
b. yield gap
c. premium spread
d. default zone
4. An investor has $50,000 in cash to put a $5,000 down payment on 10 different homes valued at $50,000 each and will finance the rest of the investment. Soon after buying the homes she sold all 10 homes for $60,000 each and earned a profit of $100,000 - an astounding 100% return on investment. This scenario is an example of:
Select one:
a. risk-return
b. interest rate spread
c. financial liquidity
d. leverage
The table above shows the balance sheet of Big-But-Simple Bank (BBSB). This bank has taken $60 billion of shareholders' equity and leveraged itto?
Use figure 2.4 to answer questions 6-8
5. What was the estimated bank losses, on average, for every million dollars in outstanding mortgage balances during 1996Q1? Enter your answer below. Example: If your answer is $2,500 then enter 2500 (no dollar sign, commas, or decimals).
Answer:
Question text
6. What was the estimated bank losses, on average, for every million dollars in outstanding mortgage balances during 2001Q1? Enter your answer below. Example: If your answer is $2,500 then enter 2500 (no dollar sign, commas, or decimals).
7. Which of the following statement best describes the data in figure 2.4:
Select one:
a. With the exception of a few quarters losses due to defaults were negligible.
b. With the exception of a few quarters losses due to defaults were substantial.
c. Mortgage delinquencies and defaults were relatively high.
d. There was significant volatility in the mortgage industry.
8. MBS, CDOs, and CDSs are all examples of:
Select one:
a. bonds
b. stocks
c. derivatives
d. commercial paper
9. A bond can be described as a(n):
Select one:
a. stock
b. bank loan
c. credit restriction
d. fixed-income security