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:

Avoidance

A coping mechanism that involves staying away from certain people, places, or activities to avoid discomfort or distress.

Withdrawal

The process of reducing or eliminating the use of a psychoactive substance, often characterized by distinct physical or psychological symptoms.

Aggressive Behavior

Conduct aiming to cause harm or convey hostility towards others.

Assertive Communication

A style of communication where individuals express their feelings and desires openly and respectfully, without infringing on the rights of others.