Investors Relied on the Judgment of Credit Rating Agencies Because

question 1

Multiple Choice

Investors relied on the judgment of credit rating agencies because

• A) credit rating agencies are supposed to be the experts in evaluating credit risk.
• B) information directly available to investors on mortgage pools was insufficient.
• C) credit rating agencies are supposed to perform a thorough due diligence before rating a given security.
• D) credit rating agencies are supposed to be the experts in evaluating credit risk, and they are supposed to perform a thorough due diligence before rating a given security.
• E) All of these are correct.

Identify the importance of externalities and their impact on market efficiency.

Comprehend the significance of imperfect information in market transactions.

Understand the mechanisms through which market failures can be corrected.

Distinguish between internal and external costs and benefits.

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