One Result of the Financial Meltdown of the Late 2000s

question 247

Multiple Choice

One result of the financial meltdown of the late 2000s was that mortgage institutions ________ and ________ were brought under direct control of the government.

• A)Fannie Mae; Freddie Mac
• B)Glass Steagall; Sarbanes Oxley
• C)Goldman Sachs; Morgan Stanley
• D)Lehman Brothers; FDIC

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Definitions:

WACC

Weighted Average Cost of Capital, a calculation used to estimate the average rate of return a company is expected to pay its security holders to finance its assets.

MM Model

Refers to the Modigliani-Miller theorem, which proposes that under certain market conditions and assumptions, the value of a firm is unaffected by its capital structure.

Bankruptcy Risk

The likelihood that a company will be unable to meet its financial obligations and may have to declare bankruptcy.

Debt Financing

Raising funds through borrowing, typically by issuing bonds or taking out loans, which must be repaid at a later date, usually with interest.