Which of the Following Is True of the Dodd-Frank Legislation

question 30

Multiple Choice

Which of the following is true of the Dodd-Frank legislation?

• A) Federal Deposit Insurance Corporation-insured institutions are required to keep their interests in hedge funds and private equity funds.
• B) Investment banks have to set aside reserves to cover all forms of expenditure.
• C) Originators of mortgage securities must hold 5 percent of the credit risk, thus retaining an interest in the performance of the securities.
• D) Banks will be allowed to trade in a proprietary manner but cannot continue to buy or sell from their own accounts to hedge against other investments.

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Definitions:

Minimum Return on Investment

The lowest acceptable rate of return on an investment, below which an investment is deemed unattractive.

Return on Investment

A financial ratio used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the cost of the investment.

Minimum Return on Investment

The lowest acceptable return on an investment, below which investments are considered unprofitable or not worth pursuing.

Profit Margin

A financial metric used to evaluate a company's financial health by revealing the percentage of revenue that exceeds the costs involved in making sales.