Which of the Following Is an Example of How Incentive

question 170

Multiple Choice

Which of the following is an example of how incentive structures contributed to the collapse of investment banks?

• A) The bonus structures of most executives were tied to short-term profitability.
• B) The rating agencies acted independently in assigning ratings to mortgage-backed securities and had no incentive to understate the risks.
• C) Mortgage-backed securities were closely scrutinized in order to minimize risk and obtain higher ratings.
• D) Despite SEC regulations, investment banks kept leverage ratios low in order to increase profits.

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Definitions:

Depression

A mental health disorder marked by persistent feelings of sadness, loss of interest, and a lack of energy, which can affect one's thoughts, behavior, feelings, and sense of well-being.

Antisocial Behaviour

Actions that harm or lack consideration for the well-being of others, often violating social norms or rights.

Fourth Decade

Typically refers to the years in an individual's life from age 30 to 39, often considered a significant period for psychological and social development.