Many Lessons Should Be Learned from the Credit Crunch

question 63

Multiple Choice

Many lessons should be learned from the credit crunch.

• A)One lesson is that credit rating agencies need to refine their models for evaluating esoteric credit risk created in MBS and CDOs.
• B)One lesson is that borrowers must be more wary of putting complete faith in credit ratings.
• C)One lesson is that bankers seem not to scrutinize credit risk as closely when they serve only as mortgage originators and then pass it on to MBS investors rather than hold the paper themselves.
• D)All of the above

---

Definitions:

Inventory Holding Cost

The total cost associated with storing unsold goods or materials, including warehousing, insurance, depreciation, and opportunity costs.

Overtime

The time worked beyond the standard hours defined by the employer, often compensated at a higher pay rate.

Transportation Model

A type of mathematical model used in logistics that aims to minimize the cost of distributing products from several suppliers to numerous consumers, optimizing routes and supply chains.

Aggregate Planners

Professionals who develop plans to match supply and demand forecasts for goods and services over the medium term.