The Insolvency of the FSLIC Occurred Because of

question 65

Multiple Choice

The insolvency of the FSLIC occurred because of

• A)declining real estate values.
• B)risky lending.
• C)asset liability mismatch.
• D)insider lending.
• E)All of the above.

Understand how pension programs and employment contracts can adjust to changes in the price level.

Recognize the social and economic costs of unemployment.

Understand the difference between ordinary annuities and annuities due and their valuation.

Calculate time required for investment growth under constant growth rates.

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Definitions:

Residual Dividend Approach

A method used by companies to determine the dividend payments based on the residual or leftover earnings after all operational and investment costs have been met.

Regular Cash Dividend

is a fixed amount paid per share to shareholders, typically on a quarterly basis, from a company's earnings.

Residual Dividend Approach

A policy for setting a company's dividend payment, where the dividend paid is based on earnings minus funds the firm retains to finance the equity portion of its capital budget.

Debt-to-Equity Ratio

A ratio reflecting the comparative amounts of debt and equity used to finance a company’s assets.