Credit Rating Agencies Were Subject to Conflicts of Interest in the Subprime

question 87

Multiple Choice

Credit rating agencies were subject to conflicts of interest in the subprime mortgage market because ________.

• A) banks were earning large fees by underwriting the mortgage-backed securities
• B) they had little incentives to make sure that the mortgage was a good credit risk
• C) they had weak incentives to make sure that the holders of the securities would be paid back
• D) they were earning fees from rating the mortgage-backed securities and from advising clients on how to structure the securities to get the highest ratings

Apply the Modified Accelerated Cost Recovery System (MACRS) for tax depreciation purposes.

Analyze the impact of depreciation on cash flows and tax liabilities.

Evaluate capital budgeting projects using Net Present Value (NPV) and Internal Rate of Return (IRR).

Identify and calculate incremental cash flows, including changes in working capital requirements.