Module 1, topic 2 - financial institutions, the markets
From Professor Charles' youtube talk in the e-text. Suppose you have two labor markets with different sets of employers and with different average prejudice against Blacks levels. Therefore, discrimination against Blacks will be worse, as measured by wage gaps between Whites and Blacks, in the labor market with the highest average level of prejudice against Blacks.
False
What practice made it impossible for many members of minority groups to qualify for loans to buy and improve homes?
Redlining
Suppose Fidelity Investments requires applicants for its financial advisor positions to have the Chartered Financial Analyst (CFA) designation, hires no Black financial advisors, and very few Blacks have the CFA designation. The disparity in Fidelity's hiring of White versus Black financial advisors is most likely attributable to
Statisical Discrimination
Lending discrimination happens when lenders base credit decisions on factors other than the borrower's creditworthiness, including any of the protected classes defined under federal law. Today, what three federal laws offer protection against lending discrimination?
The Fair Housing Act, The Community Reinvestment Act, and the Equal Credit Opportunity Act
Francis Galton's discovery was
a diverse collection of independently deciding individuals is likely to make better value decisions than individuals or even experts
From "The Big Short," the antagonists (those betting against the big banks) individually or together
argued fraud has never worked (long term) argued there is no diffference between stupid and illegal sought to profit from the greed and stupdity of big banks
Financial markets are __________ in which suppliers of funds and demanders of funds can transact business directly.
auctions
2.4 - Lending discrimination occurs when lenders base credit decisions on factors related to the applicant's creditworthiness.
false
The shadow banking system has escaped regulation primarily because it does not accept traditional bank deposits. As a result, many of the shadow banking institutions have been able to employ higher market, credit and liquidity risks, and have higher capital requirements.
false
Investment banks make loans that individuals and businesses use to buy goods or expand business operations, which in turn leads to more deposited funds that make their way to bank
false Investment banks help firms obtain long term financing by facilitating debt and equity offerings in the financial markets, advise firms on major financial market transactions such as mergers and restructuring, and engage in trading and market-making activities.
The capital market is where firms obtain external short term financing.
false Money markets are where firms obtain short term financing.
The shadow banking system refers to ______________________ involved in facilitating the creation of credit, that is lending, much like traditional banks but are not subject to regulatory oversight.
financial intermediaries
A liquid market -
has many available buyers and sellers and comparatively low transaction costs
As described in "The 2008 Credit Crisis Visualized," low interest rates
incentivized banks to increase leverage
2.3 - As described in "The 2008 Credit Crisis Visualized," the financial system, commonly known as Wall Street, brings together
investors and homeowners (borrowers)As described in "The 2008 Credit Crisis Visualized," low interest rates
What is the hurdle rate?
the cost of financing
2.1 - Why do firms need the financial system?
to obtain long term funds accommodate near term cash inflows and outflows to facilitate short term cash management policies
2.2 - From investors' perspectives, the role of capital markets is to be an efficient market that allocates funds to their most productive uses.
true
A collateralized debt obligation (CDO) bundles house payments and creates safe, okay, and risky investment vehildes.
true
An efficient market (Links to an external site.) allocates funds to their most productive uses as a result of competition among wealth-maximizing investors and determines and publicizes prices that are believed to be close to their true value.
true
From Professor Charles' youtube talk in the e-text. Professor Charles' research shows that average prejudice levels over the past 50 years have decreased dramatically but wage and promotion differences persist but at a lower level.
true
From investors' perspectives, the role of capital markets is to be an efficient market that allocates funds to their most productive uses.
true
Financial institutions are intermediaries that channel the savings of individuals, businesses, and governments into loans or investments.
True
From" The Inside Job" trailer - One criticism leveled at investment banks following the 2008 financial crisis was they were having massive private gains at the expense of public losses.
True
