How does a Loan to Value Ratio (say an 80% LVR limit) achieve the objectives of Macro-prudential policy? Prove explanations in detail with an example
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How does a Loan to Value Ratio (say an 80% LVR limit) achieve the objectives of Macro-prudential policy? Prove explanations in detail with an example
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- Alistair Byrne and Stephen P Utkus stated that Behavioural FinanceSelect one:a. is a part of finance that seeks to understand and explain the systematic financial market implications ofpsychological decision processes. b. encompasses research that drops the traditional assumptions of expected utility maximization with rationalinvestors' inefficient markets.c. is the study of the influence of psychology on the behavior of financial practitioners and the subsequenteffect on the markets.d. is an extension of behavioral economics, which uses psychological insights to inform economic theory.e. studies the psychology of financial decision-making.Why is it a good idea for macroprudential policies torequire countercyclical capital requirements?How do information asymmetries affect financing decisions?
- HOW DO T-BILL YIELDS GO NEGATIVE? BY THE APLIA ECONOMICS CONTENT TEAM The week of September 15, 2008, was ripe with volatility in U.S. financial markets. Events unfolding in the wake of the mortgage crisis made investors extremely fearful. One result of this fear was a “flight to quality” as investors sought to avoid risk by moving their funds into the safest asset classes. U.S. Treasury securities (or “Treasuries,” as they’re commonly known) are one such asset class, considered to have virtually no risk. An article from the Associated Press (Madlen Read, “Treasures Dip on RTC Speculation, but Anxiety High,” September 18, 2008) discusses some of the factors that led investors to bid up the prices of 3-month United States Treasury bills (T-bills) to such an extent that their yields fell to a shockingly low level. Before 2008, the last time the T-bill yield was negative was 1940, in the early stages of World War II. According to the article: Heavy buying of the 3-month Treasury bill,…Why aren't more resources being allocated to sufficient prudential oversight of the financial system in order to rein in excessive risk-taking, when it is evident that such monitoring is necessary to avoid financial crises?True or false When financial intermediaries deleverage, firms cannot fund investment opportunities resulting an increased opportunity for growth.
- Which of the statements about subprime lending is false? Before the 2008 financial crisis, financial institutions increased the number of subprime loans they issued as home prices continued to rise. If a home owner is unable to afford the mortgage payments, the homeowner can always pay off the mortgage by selling the home. Subprime lending occurs when financial institutions issue loans to individuals who are less likely to be able to repay their loan than individuals who meet a set of standards. The risks associated with subprime lending increase as the likelihood of falling home prices increase.Discuss the following statements: “(1) individual financial institutions will generally have unimportant effects on market prices or the economy as a whole and (2) serving their financial interests always safeguards stability of the financial system” according toa) microprudential b) macroprudential approaches?In Pakistan there is currently a pensions crisis because the government did not plan pensions of public sector employees efficiently. Instead of raising funds from lifetime earnings of employees, and giving pensionsas returns on savings, pensions currently require budgetary allocation in Pakistan, leading to financial burden on government. In developed countries like the US, where people plan their own pensions this planning for retirement requires a lot of effort, forward thinking and knowledge of financial opportunities. Even then pensions are never completely secure in the US.So, this system is not entirely suitable in Pakistan. Examine the Pension Crisis from perspective of Permanent Income Hypothesis and its modern versions to explain the possible causes of this crisis. Related to causes in part I suggest solutions to the pension crisis in Pakistan
- With the biting economy and dwindling levels of income, many Microfinance clients have been affected and so MFIs are likely to experience low business and high defaults. As the CEO of the MFI in question, explain the measures you will take to tackle this challengeWhat benefit do people get from the market forinsurance? What two problems impede the insurancemarket from working perfectly?Which of the following assertions about a Whole Life insurance policy is TRUE?A. Premium payments may be increased or decreased at the premium payer's discretion.B. A person's beneficiary designation can only be changed if that individual passes a medical examination. C. The policy owner can borrow against the policy's cash value. D. In order to receive the death benefit, the specified beneficiary must provide proof of ongoing insurable interest in the insured's life.