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10.5D: Public Health Measures for Disease Control - Biology

10.5D:  Public Health Measures for Disease Control - Biology


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Promotion of hand washing, breastfeeding, delivery of vaccinations, and distribution of condoms are examples of public health measures.

Learning Objectives

  • Give examples of common public health measures that are recommended to control the spread of disease

Key Points

  • Hand washing for hand hygiene is the act of cleaning the hands with or without the use of water or another liquid, or with the use of soap, for the purpose of removing soil, dirt, and/or microorganisms.
  • Breastfeeding is the feeding of an infant or young child with breast milk directly from female human breasts (i.e., via lactation) rather than from a baby bottle or other container.
  • Vaccination is the administration of antigenic material (a vaccine ) to stimulate an individual’s immune system to develop adaptive immunity to a pathogen.

Key Terms

  • hygiene: Those conditions and practices that promote and preserve health.
  • immunity: the state of being insusceptible to a specific thing.
  • vaccination: inoculation with a vaccine in order to protect a particular disease or strain of disease.

Public Health Measures

The focus of public health intervention is to improve health and quality of life through the prevention and treatment of disease and other physical and mental health conditions. This can be done through surveillance of cases, and the promotion of healthy behaviors. Promotion of hand washing and breastfeeding, delivery of vaccinations, and distribution of condoms to control the spread of sexually transmitted diseases, are examples of common public health measures.

HAND WASHING

Hand washing for hand hygiene is the act of cleaning the hands with or without the use of water or another liquid, or with the use of soap, for the purpose of removing soil, dirt, and/or microorganisms. Medical hand hygiene pertains to the hygiene practices related to the administration of medicine and medical care that prevents or minimizes disease and the spreading of disease. The main medical purpose of washing hands is to cleanse the hands of pathogens (including bacteria or viruses) and chemicals, which can cause personal harm or disease. This is especially important for people who handle food or work in the medical field, but it is also an important practice for the general public. People can become infected with respiratory illnesses, such as influenza or the common cold; for example, if they don’t wash their hands before touching their eyes, nose, or mouth. Indeed, the Centers for Disease Control and Prevention (CDC) has stated: “It is well documented that one of the most important measures for preventing the spread of pathogens is effective hand washing. ”

As a general rule, however, handwashing protects people poorly or not at all from droplet- and airborne diseases, such as measles, chickenpox, influenza, and tuberculosis. It protects best against diseases transmitted through fecal-oral routes (such as many forms of stomach flu) and direct physical contact (such as impetigo). In addition to hand washing with soap and water, the use of alcohol gels is another form of killing some kinds of pathogens and healthful bacteria, but their effectiveness is disputed, and may lead to antibiotica-resistant bacterial strains.

BREASTFEEDING

Breastfeeding is the feeding of an infant or young child with breast milk directly from female human breasts (i.e., via lactation) rather than from a baby bottle or other container. Babies have a sucking reflex that enables them to suck and swallow milk. It is recommended that mothers breastfeed for six months or more, without the addition of infant formula or solid food. After the addition of solid food, mothers are advised to continue breastfeeding for at least a year, and can continue for two years or more. Human breast milk is the healthiest form of milk for babies. There are few exceptions, such as when the mother is taking certain drugs or is infected with human T-lymphotropic virus, or has active untreated tuberculosis. Maternal HIV infection is always an absolute contraindication to breastfeeding in developed countries with access to infant formula and clean drinking water (regardless of maternal HIV viral load or antiretroviral treatment) due to the risk for mother to child HIV transmission. Breastfeeding promotes health and helps to prevent disease. Artificial feeding is associated with more deaths from diarrhea in infants in both developing and developed countries. Experts agree that breastfeeding is beneficial, and have concerns about artificial formulas but there are conflicting views about how long exclusive breastfeeding remains beneficial.

VACCINATION

Vaccination is the administration of antigenic material (a vaccine) to stimulate an individual’s immune system to develop adaptive immunity to a pathogen. Vaccines can prevent or ameliorate morbidity from infection. The effectiveness of vaccination has been widely studied and verified; for example, the influenza vaccine, the HPV vaccine, and the chicken pox vaccine. Vaccination is the most effective method of preventing infectious diseases; widespread immunity due to vaccination is largely responsible for the worldwide eradication of smallpox and the restriction of diseases such as polio, measles, and tetanus from much of the world.

CONDOMS

A condom is a barrier device commonly used during sexual intercourse to reduce the probability of pregnancy and spreading sexually transmitted diseases. It is put on a man’s erect penis and physically blocks ejaculated semen from entering the body of a sexual partner. Condoms are also used for collection of semen for use in infertility treatment. In the modern age, condoms are most often made from latex, but some are made from other materials such as polyurethane, polyisoprene, or lamb intestine. A female condom is also available, often made of nitrile.


Financial Markets - Coursera All Quiz & Assignments Answer &lpar With Explanations&rpar

Which of the following professions has the highest projected employment for 2024&quest&Tab1 &sol 1 point &NewLine &NewLine Economist Teacher &NewLine Financial Advisor Truck driver &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following is NOT a learning objective in this course&quest&Tab1 &sol 1 point &NewLine &NewLine How we incentivize people to get things done How to make money &NewLine Regulating financial markets &NewLine Applying psychology and sociology to finance &NewLine &NewLine &NewLine Correct &NewLineWhile you may learn this as a result&comma learning how to making money is not a theme of the course&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabAccording to Andrew Carnegie&comma what should somebody do once she is wealthy&quest&Tab1 &sol 1 point &NewLine &NewLine Retire late to accumulate as much wealth as possible&comma and then give the wealth away Retire early and commit to philanthropy while young &NewLine &NewLine &NewLine Throw extravagant parties to help her wealth trickle down Pass it on to her children &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhy is it relevant that finance tends to attract large amounts of money&quest&Tab1 &sol 1 point &NewLine &NewLine Money can be used for good or evil &NewLine Finance attracts people from around the globe &NewLine Financial markets are a critical components of economic success All of the above &NewLine &NewLine Correct &NewLine &NewLine &NewLineLesson &num2 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabA stress test&colon &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine Does not look at historical returns&comma and looks at all the details of the portfolios and their vulnerabilities during all sorts of potential financial crises&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Tries to incorporate all the interconnections between financial institutions&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Tries to incorporate all potential economic and financial crises&comma such as recessions&comma appreciation and depreciation of currency&comma liquidity crisis&comma etc&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Aims to test the behavior of historical returns and their fluctuations during all sorts of potential financial crises&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabA 5&percnt 3-month Value At Risk &lparVaR&rpar of &dollar1 million represents&colon&Tab1 &sol 1 point &NewLine &NewLine The likelihood of a 5&percnt of &dollar1 million decline in the asset over the next 3-month&period &NewLine A 5&percnt decline in the value of the asset after 3 month&comma per each &dollar1 million of notional&period &NewLine A 5&percnt chance of the asset increasing in value by &dollar1 million during the 3-month time frame&period &NewLine &NewLine A 5&percnt chance of the asset declining in value by &dollar1 million during the 3-month time frame&period &NewLine &NewLine &NewLineCorrect &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIn the Capital Asset Pricing Model &lparCAPM&rpar&comma a measure of systematic risk is captured by&colon&Tab1 &sol 1 point &NewLine &NewLine The standard deviation of returns&period The variance of returns&period &NewLine The Beta&period The Alpha&period &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabMarket &lparor systematic&rpar risk &Tabwhereas idiosyncratic risk &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &Tab&period &NewLine &NewLine Is the risk for an asset to experience losses due to factors that affect the entire stock market &NewLine &NewLineIs the risk which is endemic to a specific asset and therefore not the market as a whole Is the risk for an asset to not be able to be traded in the market at a later time &NewLineIs the risk for an asset to experience losses due to factors that affect the entire stock &NewLinemarket &NewLine &NewLine Is the risk for an asset to experience losses due factors that solely affect the industry associated with the asset &NewLineIs the risk which is endemic to a specific asset and therefore not the market as a whole Is the risk for an asset to experience losses due to factors that affect the entire stock &NewLinemarket &NewLine &NewLineIs the risk which is endemic to the industry of the asset and therefore not the market as a whole &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine&Tab&bull&TabWhy might an investor not normally invest large sums of money into Walmart or Apple stock&quest &NewLine &NewLine Their stock prices are highly volatile&comma and thus carry a lot of risk Their stock prices closely track the S&P500 &NewLine Both companies have received extensive media coverage &NewLine The stock prices are very stable&comma making it difficult to gain large sums of money &NewLine &NewLine &NewLine Correct &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhy is the normal distribution not a good model of some financial data&quest&Tab1 &sol 1 point &NewLine &NewLine The standard deviation is too low The standard deviation is too high Extreme events occur in it too often It does not have many outliers &NewLine &NewLine Correct &NewLineMost values drawn from a normal distribution are within a few standard deviations of the mean&period This is not the case in the S&P500 data&comma for example&period &NewLine &NewLine &NewLineLession &num3 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabWhich of these best describes risk pooling&quest&Tab1 &sol 1 point &NewLine &NewLine Sick people are more likely to sign up for health insurance&comma and healthy people will not purchase the policy because this will make the premium more expensive &NewLine &NewLine If individual events are independent&comma risk can be decreased by averaging across all of the events &NewLine &NewLine Insurance companies must avoid situations whereby customers are incentivized to intentionally cause an incident &lpare&periodg&period burning their house down&rpar &NewLine &NewLine If individual events are not independent&comma risk can be decreased by averaging across all of the events &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following was NOT a factor which led to the proliferation of life insurance&quest&Tab1 &sol 1 point &NewLine &NewLine Insurance salespeople Increased life expectancy &NewLine Statistical data on life expectancy New sales pitches &NewLine &NewLine Correct &NewLineLife insurance was initially designed to provide for the family if the breadwinner passed away&comma so increased life expectancy has started to eliminate the need for life insurance&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat happens in the United States if your insurance company goes bankrupt&quest&Tab1 &sol 1 point &NewLine &NewLine &NewLine There is no protection from the government against insurance company failure Consumers are insured from insurance company failure at the state level &NewLine Insurance companies are partially owned by the government&comma and thus are not allowed to fail&period &NewLine &NewLine Just like the FDIC protects consumers from bank failures&comma the federal government insures against insurance company failures &NewLine &NewLine &NewLine &NewLine Correct &NewLineInsurance against insurance company failure happens at the state level&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat problem does the US Affordable Care Act &lpar&OpenCurlyDoubleQuoteObamacare&rdquo&rpar attempt to address and how does it do so&quest &NewLine &NewLine It addresses moral hazard by allowing hospitals to refuse treatment to those who cannot pay for it&period &NewLine &NewLine It addresses selection bias by creating a healthcare system which is fully publicly- funded&period &NewLine &NewLine It addresses moral hazard by forcing hospitals to provide emergency services to those who cannot pay for it&period &NewLine &NewLine It addresses selection bias by forcing everybody to buy health insurance or else face a tax penalty&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine Correct &NewLineSelection bias describes the phenomenon that only people who have an immediate need for insurance will be incentivized to purchase it&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabOne of the main reasons why many homeowners did not have flood insurance before the advent of Hurricane Katrina in 2005 was&colon &NewLine &NewLine Homeowners thought that the likelihood of a flood was too low to justify buying a flood insurance&period &NewLine &NewLine Many homeowners were relying on the government instead&period &NewLineMany homeowners were not aware that flood insurance existed in the first place&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine Insurance premiums in Louisiana went up by 70&percnt between 1997-2005&comma causing many people to cancel their insurance&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineLesson &num4 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabUnder the &OpenCurlyDoubleQuoteDon&rsquot put all your eggs in one basket&rdquo analogy&comma the eggs represent individual investments and the basket represents the overall investment portfolio&period Spreading your &OpenCurlyDoubleQuoteeggs&rdquo around allows you to&colon &NewLine &NewLine Minimize the possibility that bad luck for a single investment adversely affects your overall portfolio&period &NewLine &NewLine Maximize the return of your overall portfolio&period &NewLine Maximize the possibility that good luck for a single investment positively affects your overall portfolio&period &NewLine &NewLine Increase the uncertainty of your overall portfolio so you can try to generate an extra return&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine Correct &NewLineThis is the principle of risk diversification&period By spreading the &OpenCurlyDoubleQuoteeggs&rdquo&comma you allow for an under-performing investment to be balanced by another and outperforming one&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabRisk diversification can be better achieved&colon &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine By including in your portfolio all classes of assets traded in the market&comma independently of their risks&period &NewLine &NewLine &NewLine &NewLine Correct &NewLineIncluding all asset classes allows you to &OpenCurlyDoubleQuoteaverage out&rdquo the extent of all potential sources of risk&period &NewLine &NewLine With only low risk assets in your portfolio&period &NewLine &NewLineWith mutual funds or unit investment trusts if you hold a small number of assets&period &NewLine &NewLine &NewLineCorrect &NewLineDiversification for individual assets is harder since you would have to buy fraction of other assets&comma which could be impossible or prohibitively expensive&period &NewLine &NewLineWith only stocks in your portfolio&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabShort selling&comma which is defined as the sale of a security that the seller has borrowed&comma is motivated by the belief that&colon &NewLine &NewLine The price of the security will rise&period &NewLine The price of the security will stay the same&period Short selling is never prompted by speculation&period The price of the security will decline&period &NewLine &NewLine Correct &NewLineBuying back the security at a lower price will allow you to make a profit&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe expected return of a portfolio is computed as &Taband the standard deviation of a portfolio is &Tab&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine the weighted average of the expected returns of each asset in the portfolio&comma weighted by the investment in each asset &NewLine &NewLinethe weighted average of the standard deviations of each individual asset the simple average of the expected returns of each asset in the portfolio &NewLineNOT the weighted average of the standard deviations of each individual asset &NewLine &NewLine the simple average of the expected returns of each asset in the portfolio the weighted average of the standard deviations of each individual asset &NewLine the weighted average of the expected returns of each asset in the portfolio&comma weighted by the investment in each asset &NewLine &NewLineNOT the weighted average of the standard deviations of each individual asset &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabAn efficient portfolio is a combination of assets which&colon&Tab1 &sol 1 point &NewLine &NewLine Achieves the highest return for a given risk&period &NewLine Offers a risk free rate of return by minimizing the risk of the portfolio&period Minimizes risk by ensuring only diversifiable risk remains&period &NewLine Achieves the highest possible covariance among its assets&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineModule 1 Honors Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabWhich of the following are new advancements and changes in finance&quest&Tab1 &sol 1 point &NewLine &NewLine &NewLine Behavioral finance &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Banking &NewLine &NewLine Information technology &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineInsurance &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat did Andrew Carnegie believe some people succeed in business and others don&apost&quest&Tab1 &sol 1 point &NewLine &NewLine The business world selects for people with natural talent The business world selects for people who work hard &NewLine The business world selects for people with a good education &NewLine The business world selects for people who get lucky opportunities &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe main difference between Value at Risk and Stress Testing is&colon&Tab1 &sol 1 point &NewLine &NewLine &NewLine Value at Risk takes a non-statistical approach&comma as opposed to Stress Testing&period Stress Testing takes a non-statistical approach with its scenarios analysis&period &NewLine Value at Risk is not a quantitative approach&period &NewLine There are no differences between the two approaches&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabAccording to the Capital Asset Pricing Model &lparCAPM&rpar&comma a security with&colon&Tab1 &sol 1 point &NewLine &NewLine An alpha of zero is able to generate a return which greater than the market return&period A positive alpha is considered overpriced&comma since the security outperforms the market&period An alpha of zero is able to generate a return which is inferior to the market return&period &NewLine A positive alpha is considered underpriced&comma since the security outperforms the market&period &NewLine &NewLine &NewLine Correct &NewLineRemember&colon Alpha is the constant in the linear relationship between the returns of the security and the returns of the market&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following are true about fat tail distributions&quest&Tab1 &sol 1 point &NewLine &NewLine They are a good model for some financial data &NewLine The mean is a good representation of the distribution They are the best choice for most types of data &NewLine We must rely on the central limit theorem to gather useful information about them&period &NewLine &NewLine &NewLine Correct &NewLineFor example&comma the daily change in stock price is usually small&comma but some days &lpare&periodg&period immediately after a market crash&rpar it can be very large&period &NewLine &NewLine&Tab&bull&TabIf an insurance company has 10000 policies&comma and each has 0&period1 probability of making a claim&comma what is the standard deviation of the fraction of policies which result in a claim&quest &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine0&period003 &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhy was the National Association of Insurance Commissioners created&quest&Tab1 &sol 1 point &NewLine &NewLine To suggest laws that would prevent insurance corporations from becoming &OpenCurlyDoubleQuotetoo big to fail&rdquo &NewLine &NewLine To suggest laws that would decentralize the insurance industry &NewLine To suggest laws that would decrease the complexity of insurance regulation To suggest laws that would strengthen the insurance industry &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabInsurance is managed by employers&comma so if an employee is sick and loses her job&comma her insurance will be expensive due to preexisting conditions&semi by contrast&comma a healthy person who loses his job may not be incentivized to purchase health insurance&period This is an example of &NewLine &NewLine Moral hazard Selection bias Pooled risk HMO &NewLine &NewLine Correct &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&Tab1 &sol 1 point &NewLine &NewLineIn addition to earthquake&comma hurricane and terrorism&comma which of the following could be categorized as a &OpenCurlyDoubleQuotedisaster&rdquo risk&quest &NewLine &NewLine Market liquidity risk A World War &NewLine Bankruptcy Risk Currency Risk &NewLine &NewLine Correct &NewLineThis risk does not emerge from the market but has an impact on it&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabOne of the mentioned assumptions of portfolio management theory is that investors are rational&period A rational investor&colon &NewLine &NewLine Invests only in fully diversified portfolios&period Is always averse to risk&period &NewLine Invests in passive funds rather than active funds&period &NewLine Prefers a higher return for a given risk and prefers a lower risk for a given return &NewLine &NewLine &NewLine Correct &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe market portfolio&comma which includes all traded assets available in the market&comma must have a beta which is&colon &NewLine &NewLine Equal to 1 &NewLine Above 1 Negative Equal to 0 &NewLine &NewLine Correct &NewLineThe expected return &lparsystematic risk&rpar of a market portfolio is identical to the expected return &lparsystematic risk&rpar of the market as a whole&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine&Tab&bull&TabAmong the risks associated with short selling a stock are&colon &lparcheck all that apply&rpar &NewLine &NewLine &NewLine Default risk&colon potential unlimited losses when buying back the stock&period &NewLine &NewLine &NewLine Correct &NewLineThere is no upper limit on the price of the stock&period &NewLine &NewLine &NewLine Regulatory risk&colon a ban on short sales can create a surge in the stock price&period &NewLine &NewLine &NewLine Correct &NewLineA surge in the stock price can force the short seller to cover short positions at huge losses&period &NewLine &NewLine Dividend risk&colon the short seller must provide dividend payments on the shorted stock to the entity from whom the stock has been borrowed&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Systematic risk&colon the uncertainty inherent to the market as a whole and which cannot be diversified&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabLeveraging your portfolio&colon &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine Allows you increase your return on equity&comma magnifying positive &lparor negative&rpar returns by borrowing money&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Increases your default risk by magnifying the standard deviation &lparrisk&rpar of your portfolio&period &NewLine &NewLine &NewLine Correct &NewLineBy investing more in the risky asset in order to increase your portfolio return&comma you bear the risk of an asset pricing crash which could prevent you from paying back the money you previously borrowed&comma hence going bankrupt&period &NewLine &NewLine &NewLine Does not increase the standard deviation of your portfolio&comma since the borrowed money is risk free and therefore has a standard deviation of zero&period &NewLine &NewLine &NewLine Increases systematic risk within your portfolio&comma that is the uncertainty inherent to the market as a whole and which cannot be diversified&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabYou are an investor who wants to form a portfolio that lies to the right of the &OpenCurlyDoubleQuoteoptimal&rdquo minimum standard deviation portfolio on the efficient frontier&period You must&colon &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine Invest only in risky securities&period &NewLine Borrow money at the risk-free rate&comma invest in the minimum standard deviation portfolio and&comma in addition&comma only in risky securities&period &NewLine &NewLine Borrow money at the risk-free rate and invest everything in the minimum standard deviation portfolio&period &NewLine &NewLine Invest only in risk-free securities&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineLesson &num5 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhile discussing what the future of financial markets will look like&comma the following arguments were mentioned &lparcheck all that apply&rpar&colon &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine Financial markets are likely to stay the way they are now for the next three decades&period &NewLine &NewLine Financial markets will evolve following simple ideas and ideals&comma such as the ones historically mentioned by Karl Marx or Robert Owen&period &NewLine &NewLine &NewLine It is hard to predict the nature of future financial markets&comma this evolution will depend on the involvement of young generations within the financial community&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine It is hard to predict the nature of future financial markets&comma since human species is the product of a complex evolution&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIn his work&comma David Moss describes how investors&rsquo psychology favored limited liability after the early 19th century New York experiment&period In fact&comma the comparison between investors&rsquo psychologies in the context of unlimited liability and lottery tickets is&colon &NewLine &NewLine Asymmetrical&period Unlimited liability investors tend to overestimate the minimum probability of loss&comma whereas in lottery tickets&comma they overestimate the minimum probability of win&period &NewLine &NewLine Symmetrical depending on the amount of money involved&period For large amounts&comma both unlimited liability and lottery tickets investors tend to overestimate the minimum probability of loss&period &NewLine &NewLine Symmetrical&period Unlimited liability and lottery tickets investors tend to overestimate the minimum probability of loss&period &NewLine &NewLineThere is no such comparison between lottery tickets and unlimited liability investors&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLineCorrect &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe introduction of inflation indexed debt was motivated by&colon &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine Historical examples of nominal debt being wiped out in real terms by high inflation&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine An incentive to hedge from inflation volatility&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine An incentive to have a debt contract fixed in real terms&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineThe idea to generate profits when inflation is equal to 0&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhy did Chile introduce the Unidad de Fomento &quest&Tab1 &sol 1 point &NewLine &NewLine To create a unit of account indexed to inflation&comma in order to counteract the impact of hyperinflation&period &NewLine &NewLine To provide stimulus to the economy&period To bolster international trade&period &NewLine To replace the peso as the official currency because of hyperinflation&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe concept of equity-protected mortgages consists in&colon&Tab1 &sol 1 point &NewLine &NewLine &NewLine Mortgages that include house price insurance&period Mortgages that include fire insurance&period &NewLine Mortgages that include accident insurance&period Mortgages that include casualty insurance&period &NewLine &NewLine Correct &NewLineAs an example&comma if the house price falls below the amount you owe&comma the mortgage debt will be corrected down&period &NewLine &NewLine &NewLineLesson &num6 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIn the S&P 500 forecasting exercise&comma many subjects seemed to be subject to the representativeness heuristic&period This concept of behavioral finance posits that&colon &NewLine &NewLine Most people don&rsquot behave like forecasters&comma they tend to be affected by their recurring thoughts at the time&period &NewLine &NewLine Most people don&rsquot behave like forecasters&comma they tend to interpret new evidence as a confirmation of their existing beliefs or theories&period &NewLine &NewLine Most people don&rsquot behave like forecasters&comma what they saw in the past is representative of the future&period &NewLine &NewLine Most people don&rsquot behave like forecasters&comma they tend to rely too heavily on the first piece of new information offered when making decisions&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabAn efficient market is defined as one in which&colon&Tab1 &sol 1 point &NewLine &NewLine All participants have the same opportunity to generate the same returns&period Asset prices quickly and fully reflect all available information&period &NewLine Asset prices are often in line with the intrinsic value&period Transactions are ultimately costless&period &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe Dividend Discount Model &lparor Gordon Growth Model&rpar can be stated as follows&period &NewLine &NewLineLet the investor&rsquos discount rate be equal to r &periodIf earnings equal dividends&comma and if dividends grow at the long-run rate g&comma then the price of the stock P can be written as follows&colon &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine P &equals E&sol&lparr&plusg&rpar P &equals &lparE&astg&rpar&sol&lparr&rpar &NewLine P &equals E&sol&lparr-g&rpar &NewLine P &equals &lparE&astr&rpar&sol&lparg&rpar &NewLine &NewLine &NewLine Correct &NewLineThe price is the present value of the stock&rsquos future earnings&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabHuman judgment and experience can play a role in the advent of stock market crash because&colon &NewLine &NewLine Investors with an experience of financial crises are better at staying out of the market in turbulent times&period &NewLine &NewLine A lot of people who have lived through financial crises have reported that&comma as a consequence of these crises and their narratives&comma their faiths in the market have diminished&period &NewLine &NewLineInvestors with an experience of financial crises are better at diversifying their portfolios&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine Investors with an experience of financial crises are better at exploiting profit opportunities&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineLesson &num7 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabWhich of the following best describes the &OpenCurlyDoubleQuoteinvisible hand&rdquo&quest&Tab1 &sol 1 point &NewLine &NewLine Subtle government economic interventions can lead to the inefficient allocation of resources&period &NewLine &NewLine The free market&comma guided by self-interest&comma is mislead to inefficiently allocate resources&period &NewLine The free market&comma guided by self-interest&comma ensures the sufficient production of goods to meet society&rsquos demands&period &NewLine &NewLine Subtle government economic interventions can ensure the sufficient production of goods to meet society&rsquos demands&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat problems does prospect theory solve&quest &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine People can underestimate high probabilities and overestimate low probabilities &NewLine &NewLine &NewLine Correct &NewLineThe weighting function shows that there is a difference between the actual probability of an event and the subjective probability &NewLine &NewLine People do not treat gambles as equivalent to their expected utility &NewLine &NewLine &NewLine Correct &NewLineFor example&comma expected utility theory predicts that everyone should take a gamble with a 50&percnt chance of winning &dollar200 and a 50&percnt chance of losing &dollar100&comma but in practice many people do not take this gamble&period &NewLine &NewLinePeople will make big gambles to avoid losses &NewLine &NewLine &NewLine Correct &NewLineThe value function indicates that once people have lost a lot of money&comma they will be more likely to make risky gambles with the purpose of coming back to their baseline&period &NewLine &NewLinePeople will often make purchases impulsively &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is the wishful thinking bias&quest&Tab1 &sol 1 point &NewLine &NewLine People think that&comma if they hope for something strongly enough&comma it will be more likely to happen&period &NewLine &NewLine People hope that their sports team or political candidate will win People do not consider the probability of the things they want most&period &NewLine People over-estimate probabilities of things they would like to be true&period &NewLine &NewLine &NewLine Correct &NewLineFor example&comma people over-estimate the probability that their favorite sports team or political candidate will win&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabRicardo thinks that&comma since society seems similar to what it was in the late 1920s&comma a second Great Depression is coming soon&period To which cognitive bias is Ricardo falling victim&quest &NewLine &NewLine The disjunction effect Attention anomalies &NewLine Representativeness heuristic The framing effect &NewLine &NewLine Correct &NewLineEven though the probability of another Great Depression is low&comma current conditions seem to fit this single example&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is Newcomb&rsquos paradox&quest&Tab1 &sol 1 point &NewLine &NewLine &NewLine &NewLine People will behave differently if playing games against a computer compared to playing them with a human opponent&period &NewLine &NewLine People sometimes change their behavior when they learn about a prediction which has been made about the future&period &NewLine &NewLine People prefer a small chance at winning &dollar1 million than a high chance of winning &NewLine&dollar1000&period &NewLine &NewLine People behave irrationally when faced with decisions which involve large sums of money&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following is NOT a common trait of somebody with Antisocial Personality Disorder&quest &NewLine &NewLine Lack of desire to interact with others Heightened self-esteem &NewLine &NewLine1 &sol 1 point &NewLine &NewLine Manipulative Lack of empathy &NewLine &NewLine &NewLine Correct &NewLineThose with Antisocial Personality Disorder like to manipulate&comma not avoid&comma others&period &NewLine &NewLine &NewLineModule 2 Honors Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabA limited liability corporation in which you are a shareholder has just gone bankrupt&period The company has a large debt&comma that is its liabilities are far in excess of its assets&period Hence&comma you will be called on to pay&colon &NewLine &NewLine A proportional share of all creditor claims based on the number of common shares that you own&period &NewLine &NewLine A proportion of the total debt&comma which is decided at the discretion of the bankruptcy judge&period &NewLine &NewLine An amount that could&comma at most&comma equal what you originally paid for the shares of common stock in the corporation&period &NewLine &NewLine Nothing&period &NewLine &NewLine &NewLine Correct &NewLineYou are a limited liability investor&comma hence you are not liable for the debt of the firm&period You will at most lose the value of your shares&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe inflation risk&comma which inflation indexation aims to mitigate &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine Is associated with any investment that involves cash flows over time&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Is the risk that the cash flow from an investment won&rsquot be worth as much in the future because of changes in purchasing power due to inflation&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Is the risk that the nominal rate of return of an investment will exceed the rate of inflation&period &NewLine &NewLine &NewLine Is not the risk that there will be inflation&comma it is the risk that inflation will significantly fluctuate over time&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe concept of human capital risk &lparcheck all that apply&rpar&colon&Tab1 &sol 1 point &NewLine &NewLine &NewLine Is a risk associated with the present value of all your future wages&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Is not correlated with professional competency&period Is not correlated with the stock market&period &NewLine Can also be considered as a protection against inflation&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe random walk hypothesis of the Efficient Market Theory posits that&colon&Tab1 &sol 1 point &NewLine &NewLine Historical stock prices follow a random walk&period Stock price volatility follows a random walk&period Historical stock returns follow a random walk&period &NewLine Short-term investment returns are inherently unpredictable&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabSuppose a market is inefficient&period As new information is received about an asset&colon&Tab1 &sol 1 point &NewLine &NewLine &NewLine Investors will short the stock&period &NewLine The volatility &lparstandard deviation&rpar of the stock price will increase&period There will be a lag in the adjustment of the stock price&period &NewLine Nothing will happen&period &NewLine &NewLine &NewLine Correct &NewLineIn an efficient market&comma the stock price will be instantaneously updated after new information is received&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabInvestors mainly use the price-to-earnings &lparP&solE&rpar ratio in order to&colon&Tab1 &sol 1 point &NewLine &NewLine Decide how much profit a company is likely to make in the future&period Determine the optimal risk-return ratio&period &NewLine Decide whether a company&rsquos shares are overpriced or underpriced&period Determine the optimal price for the company&rsquos products&period &NewLine &NewLine Correct &NewLineFor instance&comma a high P&solE ratio can imply that the shares are overpriced with respect to the company&rsquos fundamental value&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is the shape of the value function in prospect theory&quest&Tab1 &sol 1 point &NewLine &NewLine Gains&colon concave up&semi Losses&colon concave up Gains&colon concave up&comma Losses&colon concave down Gains&colon concave down&semi Losses&colon concave up &NewLine Gains&colon concave down&semi Losses&colon concave down &NewLine &NewLine &NewLine Correct &NewLineSince gains are concave up&comma gaining &dollar2000 on one day has a lower value than gaining &dollar1000 on two separate days&period Since losses are concave down&comma losing &NewLine&dollar20000 on one day has a higher value than losing &dollar1000 on two separate days&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following provide evidence that investors experience cognitive dissonance&quest&Tab1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine Investors buy and sell stocks very rapidly &NewLine &NewLine Investors choose investments which already have many other investors Investors do not remember the negative performance of their investments&period &NewLine &NewLine Correct &NewLineThey selectively remember when their investments were doing well&period Thus&comma they still feel they made a good decision&period &NewLine &NewLine Investors hold onto funds that are doing poorly &NewLine &NewLine &NewLine Correct &NewLineIf they initially chose to invest in the fund&comma they selectively ignore evidence that their choice was wrong&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following situations are examples of the framing effect&quest &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine An elevator lists a maximum capacity of 2000 lbs&comma even though it can safely carry up to 5000 lbs&period &NewLine &NewLine A mattress which costs &dollar1000 is advertised as &dollar4000 with a "75&percnt off" sticker on it &NewLine &NewLine &NewLine Correct &NewLineRather than buying a &dollar1000 mattress&comma the customer believes she is getting a &NewLine&dollar4000 mattress for the price of a &dollar1000 mattress&period &NewLine &NewLine &NewLine A gold coin is sold for &dollar1000&comma even though it is only worth &dollar300&period &NewLine &NewLineA stock splits from &dollar60 to &dollar30 and investors are given twice as many shares &NewLine &NewLine &NewLineCorrect &NewLineWhen it splits&comma investors still remember the &dollar60 price and thus are willing to pay more for a share&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following defines the relationship of doctors to patients&comma but generally does not apply to the relationship of financial advisors to their clients&quest &NewLine &NewLine Patients can do their own background research on medical concepts to help them better understand their health&comma but finance is too complicated for clients to do this&period &NewLine &NewLine Doctors use both data and experience&solintuition when advising patients&comma but financial advisors must use either one or the other&period &NewLine &NewLine Doctors have made an oath of loyalty to their patients&comma but financial advisors have not&period Patients may seek second opinions from other doctors&comma but not from financial advisors&period &NewLine &NewLine Correct &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich describes the concept of social contagion&quest&Tab1 &sol 1 point &NewLine &NewLine Contagious diseases tend to spread in social situations&period &NewLine When an idea gains cultural momentum&comma it is more likely to be propagated throughout generations &NewLine &NewLine Ideas can evolve and develop in a similar way to genes&comma and we can use the principles of evolutionary biology to understand this development&period &NewLine &NewLine Mathematical models of disease spread can be applied to the spread of ideas &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineLesson &num8 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabWhich of the following describes current short term interest rates&quest&Tab1 &sol 1 point &NewLine &NewLine They are approximately equal to zero They are very high &NewLine They are strongly negative &NewLine They are changing for the first time in the last 100 years &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is the Federal Funds Rate and how long does it take to mature&quest&Tab1 &sol 1 point &NewLine &NewLine The longest term interest rate in the federal government&comma which takes one year to mature&period &NewLine &NewLine The shortest term interest rate in the federal government&comma which takes one hour to mature&period &NewLine &NewLine The shortest term interest rate in the federal government&comma which takes one month to mature&period &NewLine &NewLine The shortest term interest rate in the federal government&comma which takes one day to mature&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIf you put &dollar1000 into an account with a 20&percnt interest rate&comma how much money will you have at the end of the year if interest is compounded ONCE per year&quest &NewLine &NewLine200 &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine 1200 &NewLine 1210 &NewLine 1440 &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabHow do coupon bonds work&quest&Tab1 &sol 1 point &NewLine &NewLine You purchase a bond for the same price you eventually sell it for&comma but if you have a &OpenCurlyDoubleQuotecoupon&rdquo&comma you may buy it for less money&period &NewLine &NewLine You purchase a bond for the same price you eventually sell it for&comma but while it reaches maturity&comma you may clip &OpenCurlyDoubleQuotecoupons&rdquo off the bond and exchange them for money&period &NewLine &NewLine You purchase a bond for the same price you eventually sell it for&comma but bond owners are eligible for special offers from the federal government&comma also known as &OpenCurlyDoubleQuotecoupons&rdquo&comma which incentivize the purchase of the bonds&period &NewLine &NewLine You purchase a bond for one price&comma but the final price you may sell it for depends on the type of &OpenCurlyDoubleQuotecoupons&rdquo that are released to account for inflation&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is the main difference between a consol and an annuity &quest&Tab1 &sol 1 point &NewLine &NewLine The consol has a fixed price of &dollar1 at inception whereas the annuity price is given by the market&period &NewLine &NewLine A consol pays a constant quantity &lparcoupon&rpar forever&comma whereas the annuity also pays a constant quantity but only until a fixed time T called the maturity date&period &NewLine &NewLine &NewLine An annuity pays a constant quantity &lparcoupon&rpar forever&comma whereas the consol also pays a constant quantity but only until a fixed time T called the maturity date&period &NewLine &NewLine A consol is not subject to market risk&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe forward rate is&colon&Tab1 &sol 1 point &NewLine &NewLine The expected rate &lparyield&rpar on a bond several months or years from now&period The &lparinflation-adjusted&rpar rate on a bond&period &NewLine Equal to the yield to maturity of the bond&period Equal to the nominal rate of the bond&period &NewLine &NewLine Correct &NewLineForward rates are interest rates that can be taken in advance using term structure&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe real interest rate is calculated by&colon&Tab1 &sol 1 point &NewLine &NewLine Subtracting the inflation rate from the nominal interest rate&period Adding the inflation rate and the nominal interest rate&period &NewLine Subtracting the nominal interest rate from the inflation rate&period Adding the nominal interest rate and the yield to maturity&period &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIrving Fisher&rsquos Debt Deflation Theory starts from the observation that&colon&Tab1 &sol 1 point &NewLine &NewLine &NewLine Deflation redistributed real wealth from creditors to debtors&period Deflation has no impact on the real wealth of debtors&period &NewLine Deflation redistributed real wealth from debtors to creditors&period Deflation has no impact on the real wealth of creditors&period &NewLine &NewLine Correct &NewLineDeflation raises the level of debt in real terms&comma shifting wealth to creditors&period &NewLine &NewLine &NewLineLesson &num9 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabMarket capitalization is calculated by using&colon&Tab1 &sol 1 point &NewLine &NewLine The total number of employee of a company&period The earnings of a company&period &NewLine The price per share and the total number of outstanding shares&period The dividends of a company&period &NewLine &NewLine Correct &NewLineMarket capitalization is simply the product of these two quantities&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe greater an investor&rsquos ownership in a corporation is&comma the greater&colon&Tab1 &sol 1 point &NewLine &NewLine is the amount of taxes to be paid by the company&period &NewLine is the total number of shares he&solshe owns with respect to the total number of shares outstanding&period &NewLine &NewLine is the profitability of the company&period &NewLine is the total number of shares he&solshe owns&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabA firm must make its dividend payments to &Tabbefore it makes any dividend payments to its &Tab&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine preferred shareholders common shareholders &NewLine its Chief Executive Officer preferred shareholders &NewLine the members of the board bondholders &NewLine bondholders &NewLine &NewLinepreferred shareholders &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe basic corporate charter&colon &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine does not say that the firm ever has to raise debt&period The board decides&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLinesays that the firm must pay dividends during its lifetime&period &NewLine &NewLine &NewLine says that the firm must repurchase some of its shares beyond a certain threshold of issuance&period &NewLine &NewLine &NewLine does not say that the firm ever has to issue warrants&comma convertible debt or any other debt securities&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIn the Pecking Order Theory&comma the companies prioritize their sources of financing in the following order&colon &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &lpar1&rpar Debt&comma &lpar2&rpar Internal financing&comma &lpar3&rpar Equity&period &NewLine &lpar1&rpar Internal financing&comma &lpar2&rpar debt issuance&comma &lpar3&rpar Equity&period &NewLine &lpar1&rpar Equity&comma &lpar2&rpar Debt issuance&comma &lpar3&rpar Internal financing&period &NewLine &lpar1&rpar Equity&comma &lpar2&rpar Internal financing&comma &lpar3&rpar Debt&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabA dilution is&colon&Tab1 &sol 1 point &NewLine &NewLine The issuance of new debt by a company&period A sale of an investor&rsquos shares&period &NewLine A reduction in the ownership percentage of a share of stock caused by the issuance of new shares&period &NewLine &NewLine An increase in the ownership percentage of a share of stock caused by the issuance of new shares&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabA share repurchase is&colon &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine An alternative to paying dividends in order to return cash to investors&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine The reverse of a dilution&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine A program by which investors buy back their previously sold shares of a given company&period &NewLine &NewLine &NewLine A program by which a company buys backs its own shares from the marketplace or from its shareholders &lparat a fixed price&rpar&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe price-to-earnings ratio&colon &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine Indicates the percentage of profit that is paid out as dividends&period &NewLine &NewLine Shows how much an investor is willing to pay for the stock of the company for each dollar of the company&rsquos earnings&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Effectively shows the number of years of earnings at which the company is valued given the current level of the share price&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineMeasures the funds provided by creditors versus the funds provided by owners&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabGenerally&comma a reduction in dividend is interpreted by investors as&colon&Tab1 &sol 1 point &NewLine &NewLine A non-event&period &NewLine Good news&comma with often an increase of the stock price&period Bad news&comma with often a drop in the stock price&period &NewLine A sign of future increase in profitability&period &NewLine &NewLine &NewLine Correct &NewLine &NewLineUsually dividend cuts or omissions are bad news&comma because investors infer trouble&period &NewLine &NewLine &NewLineModule 3 Honors Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following did Eugen von Böhm-Bawerk NOT believe caused the interest rate to be a small positive number&quest &NewLine &NewLine People value money more today than they do in a year&period This is approximately the rate of technological progress&period There are advantages to roundaboutness&period &NewLine Financial knowledge and expertise accumulates at a societal level at approximately this rate&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIf you put &dollar1000 into an account with a 20&percnt interest rate&comma how much money will you have at the end of the year if interest is compounded CONTINUOUSLY&quest &NewLine &NewLine&lparWhen inputting your answer&comma enter your rounded answer without decimal precision and do not type in the &dollar dollar sign&rpar &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine1221 &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabSuppose that a consol has a promised payment of 6 pounds per 100 pounds notional&period This consol is now traded at 150 pounds&period What it the current yield to maturity of the consol&quest &NewLine &NewLine 1&percnt &NewLine2&percnt &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine 3&percnt &NewLine 4&percnt &NewLine &NewLine &NewLine Correct &NewLineThe yield to maturity of a consol is the coupon payment divided by the price of the security&comma that is &lpar6&percnt&rpar&ast100 &sol 150 &equals 4&percnt&period &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabYou observe that on today&rsquos yield curve&comma the one year rate is R1&equals6&percnt and the two year rate is R2&equals6&period5&percnt&period What is the one year forward rate one year from now &quest &NewLine &NewLine 5&percnt &NewLine 6&period5&percnt &NewLine 7&percnt &NewLine 6&percnt &NewLine &NewLine &NewLine Correct &NewLine&lpar1&plusR2&rpar&Hat2&sol&lpar1&plusR1&rpar &ndash 1 &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabA tech company can make a 3&percnt real return on an investment&period It can borrow funds to finance the investment at a nominal rate of 6&percnt and the inflation rate is 1&percnt&period Hence&colon &NewLine &NewLine The real rate of interest is 3&percnt&period &NewLine The investment will be unprofitable&period The investment will be profitable&period &NewLine The real rate of interest is 2&percnt&period &NewLine &NewLine &NewLine Correct &NewLineThe real rate of interest is 5&percnt&period Since the company can only earn 3&percnt in real terms&comma the project will be unprofitable&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIf expected inflation is less than actual inflation&comma then wealth will be redistributed from&colon&Tab1 &sol 1 point &NewLine &NewLine &NewLine &NewLine Lenders to borrowers&period &NewLine The government to consumers&period The consumers to the government&period Borrowers to lenders&period &NewLine &NewLine Correct &NewLineMore inflation than anticipated will decrease the value of debt in real terms&comma shifting wealth to borrowers&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe market capitalization of a company provides information on&colon&Tab1 &sol 1 point &NewLine &NewLine The value of a company&period &NewLine The pension benefits provided by the company&period The capital expenditures of the company&period &NewLine The industry the company operates in&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following are true for stock splits &quest &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine Market price per share is reduced after the split&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine The total number of outstanding shares increases&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Proportional ownership is unchanged&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineRetained earnings are changed&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabA rationale for preferred stock&colon&Tab1 &sol 1 point &NewLine &NewLine It lowers the cost of financing&comma as compared with debt issuance&period The dividends associated with it are tax-deductible&period &NewLine It expands the capital base without diluting common equity&period &NewLine Its holder benefits from an increased ownership in the company&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabThe Pecking Order Theory indicates that firms prefer &Tabfinancing to &Tab &NewLinefinancing&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine stock&semi debt &NewLine internal&semi external &NewLine stock&semi retained earning flexible&semi risky &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIf the company I invest in issues a stock dividend at 5&percnt&comma the value of my original shares are &Tabby a factor &Tab&period I am &Tabsince I have an additional &NewLine &Tabof value in the new shares&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine raised&comma 1&period05&sol1&comma worse off&comma 0&period05&sol1&period05 lowered&comma 1&sol1&period05&comma worse off&comma 0&period05&sol1&period05 lowered&comma 1&sol1&period05&comma better off&comma 0&period05&sol1&period05 raised&comma 1&period05&sol1&comma better off&comma 0&period05&sol1&period05 &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich one of the following statements is correct&quest&Tab1 &sol 1 point &NewLine &NewLine A cash dividend has no effect on the market value per share&period A stock repurchase increases the market value per share&period &NewLine Stock repurchases are more tax advantageous than are cash dividends&period &NewLine Stock repurchases provide more income to shareholders compared to dividends&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabA company whose stock is selling at a price-to-earnings &lparP&solE&rpar ratio that is greater than the P&solE ratio of the market most likely has&colon &NewLine &NewLine An anticipated earnings growth rate which is less than that of the average traded firm within the market&period &NewLine &NewLine An unpredictable future stream of earnings&period &NewLine A larger dividend yield compared to the dividend yield of an average traded firm within the market&period &NewLine &NewLine A dividend yield which is smaller than that of an average traded firm within the market&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&Tab14&period &NewLine &NewLineWhat are the main implications of John Lintner&rsquos dividend model&quest&Tab1 &sol 1 point &NewLine &NewLine A firm should always pay a dividend equal to its EPS &lparearnings per share&rpar&period &NewLine A firm has to strike a balance&period It should pay a dividend to share some of its earnings with shareholders but its dividend should not be too high&comma because that might lead to a cut in the dividend in a following year&comma which leads to a negative reaction among shareholders&period &NewLine &NewLine If the company&rsquos EPS is smaller than last year&rsquos dividend&comma the company should engage in share repurchases&period &NewLine &NewLine A firm should never pay any dividends&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineLesson &num10 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabWhich of the following is FALSE of Direct Participation Programs &lparDPPs&rpar&quest&Tab1 &sol 1 point &NewLine &NewLine They must operate for at least some minimum amount of time&period They are for accredited investors only &NewLine A major example of a DPP is a real estate partnerships&period They may skip corporate profits tax&period &NewLine &NewLine Correct &NewLineDPPs must have a limited lifetime&period Corporations derive much of their value from the fact that they will last for a long time&comma which is why there are restrictions on the duration of DPPs&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIf Sabine is &OpenCurlyDoubleQuoteunder water&rdquo&comma what can we say about her situation&quest&Tab1 &sol 1 point &NewLine &NewLine The value of her home is less than the value of her mortgage&period &NewLine She does not have enough money to make payments on her home&period She has no choice but to declare bankruptcy&period &NewLine She has sent her keys to the bank and abandoned her house&period &NewLine &NewLine &NewLine Correct &NewLineThis is the definition of being under water&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhy does the 30 year mortgage rate so closely match the 10 year treasury bond YTM&quest&Tab1 &sol 1 point &NewLine &NewLineBanks intentionally track the 10 year treasury bond YTM&period &NewLine &NewLine &NewLine People could choose to finance their home with 10 year treasury bonds instead of with 30 year mortgages&period &NewLine &NewLine There are similar psychological causes which influence both the 30 year mortgage rate and the 10 year treasury YTM&period &NewLine &NewLine The interest rate of 30 year mortgages and the price of 10 year treasury bonds are set by the same organization&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine30 year mortgages usually only last about 10 years because people will sell their homes&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWho pays for private mortgage insurance on a mortgage&quest&Tab1 &sol 1 point &NewLine &NewLine Thank banks &NewLine Fannie Mae and Freddie Mac The homeowner &NewLine The US government &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabBefore the recession in 2007&comma why were banks giving out mortgages to people who could not afford them&quest &NewLine &NewLine Banks had no way to verify whether people would be able to pay&period &NewLine Banks would resell to mortgages to CMOs&comma and thus they were not incentivized to make sure their mortgages were unlikely to default&period &NewLine &NewLine CMOs were incentivized to buy mortgages which were likely to default&comma since these would only affect their lowest tranche&period &NewLine &NewLine Many people faked documents in order to get a mortgage&comma known as a &OpenCurlyDoubleQuoteliar loan&rdquo &NewLine &NewLine &NewLine Correct &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLineBanks could make more money by offering mortgages to people who they knew could not pay for them&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabSelect TWO key causes of the housing bubble which crashed in 2007&colon&Tab1 &sol 1 point &NewLine &NewLine &NewLine Over-optimistic mortgage lending &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Hyper-inflation &NewLine &NewLine Corruption within the government Fraudulent mortgage lending &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabDuring the housing bubble of 2007&comma which of the following tended to fluctuate with home price index&quest &NewLine &NewLine The percentage of new homeowners who have been evicted from their home&period The percentage of new homeowners who regretted their decision&period &NewLine The percentage of new homeowners who think investing in real estate is a bad long term investment&period &NewLine &NewLine The percentage of new homeowners who think that investing in real estate is a good long term investment&period &NewLine &NewLine1 &sol 1 point &NewLine &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat in 2005 indicated the housing market might be a bubble&quest&Tab1 &sol 1 point &NewLine &NewLine &NewLine Media was discussing a home-buying mania in the American public&period Time magazine predicted that the housing market was a bubble&period &NewLine The expected 10 year home price appreciation dropped below the 30 year mortgage rate&period &NewLine &NewLine Media was discussing how people were no longer purchasing houses&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineLesson &num11 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabWhy might companies like the idea of regulation&quest&Tab1 &sol 1 point &NewLine &NewLine Regulation could be used to give them a legal monopoly over a particular sector&period &NewLine Companies have enough money to bribe government officials to create regulation that favors them&period &NewLine &NewLine It helps them ensure they are representing the interests of their customers&period &NewLine It allows them to compete on a level at which they do not have to use &lparpotentially unethical or unfair&rpar special tricks to avoid letting their competitors gain a competitive advantage&period &NewLine &NewLine &NewLine &NewLine Correct &NewLineFor instance&comma baseball players do not like it when an umpire calls them out on foul play&comma but they like the fact that umpires exist because they also ensure their opponents won&rsquot break the rules&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is tunneling&quest&Tab1 &sol 1 point &NewLine &NewLine When management of a company transfers cash from a corporate account to a personal account&period &NewLine &NewLine Any trick that somebody in the company uses to steal money from the company&period &NewLine When a member of the board of directors fires a high ranking employee so that a family member can take their place&period &NewLine &NewLine When a small group of majority shareholders in a company allow the company to be bought out for a very low price by another company in which the small group are also majority shareholders&period &NewLine &NewLine &NewLine &NewLine Correct &NewLineThis is the definition of tunneling&period &NewLine &NewLine&Tab&bull&TabIdeally&comma who must the board of directors be loyal to&quest&Tab1 &sol 1 point &NewLine &NewLine The government The shareholders The general public The CEO &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is a fixed commission&quest&Tab1 &sol 1 point &NewLine &NewLine Fixed taxes imposed on brokerages if they wished to operate in the stock market&period A fixed rate charged by all brokerages to buy or sell shares on the stock market&period The rate charged in order to join a trade groups&period &NewLine The opposite of dividends&comma i&periode&period fixed per-share prices charged by companies to shareholders&period &NewLine &NewLine &NewLine &NewLine Correct &NewLineFixed commissions were only outlawed in the US in 1975 and in the UK in 1986&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following describes the contrast of federal vs state regulation in the US&quest&Tab1 &sol 1 point &NewLine &NewLine Securities are primarily regulated by federal government but corporate regulation is primarily by the state governments&period &NewLine &NewLine Securities regulation and corporate regulation are both primarily controlled by the federal government&period &NewLine &NewLine Securities are primarily regulated by state governments but corporate regulation is primarily by the federal government&period &NewLine &NewLine Securities regulation and corporate regulation are both primarily controlled by the state governments&period &NewLine &NewLineCorrect &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is the US Securities and Exchange Commission &lparSEC&rpar NOT responsible for doing&quest&Tab1 &sol 1 point &NewLine &NewLine To manage the EDGAR database&period &NewLine To authorize companies to be traded publicly on the stock market&period To force organizations to maintain financial transparency&period &NewLine To provide reliable and timely information on the performance of securities&period &NewLine &NewLine &NewLine Correct &NewLineThe SEC does not perform this function&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following is NOT an example of insider trading&quest&Tab1 &sol 1 point &NewLine &NewLine Mohammed is a secretary for a large corporation and overhears that they are about to take over a smaller corporation&period He tells his wife&comma who purchases a large number of shares in the company immediately before the acquisition is announced&period &NewLine &NewLine Martha receives private information about a company from her stock broker&period As a result&comma she sells all of her shares in this company&comma which fall substantially in price the next day&period &NewLine &NewLine Leah is a short sells shares for a company she used to work for and then creates a fake press release with bad news from the company&period &NewLine &NewLine Chenxiang&comma the CEO of a company&comma directs the purchase and company-wide deployment of software written by his brother&period &NewLine &NewLine &NewLine &NewLine Correct &NewLineThis is an example of tunneling&comma not insider trading&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat happened when Goodbody and Company failed&quest&Tab1 &sol 1 point &NewLine &NewLine &NewLine None of the retail investors lost any money&period &NewLine Goodbody and Company had to mail everybody their stocks before they failed&period &NewLine Because Goodbody and Company held the shares for their clients&comma people lost most or all of their stocks&period &NewLine &NewLine People began to distrust brokerages and pulled their money out of stocks&period &NewLine &NewLine &NewLine Correct &NewLineThey were taken over by Merrill Lynch&comma who was reimbursed for &dollar30 million in losses from the New York Stock Exchange&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following describes the Bank for International Settlements &lparBIS&rpar&quest&Tab1 &sol 1 point &NewLine &NewLine A bank for citizens of any country which allows them to deal in other currencies&period A former financial institution which was replaced by the G20&period &NewLine The English name for the national bank of Switzerland&comma which strategically fosters relationships between banks internationally&period &NewLine &NewLine A bank for central banks which provides an intermediary for the central banks to deal with each other&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLinePeer-graded Assignment&colon Financialization of Housing &NewLineReview by Jan 6&comma 11&colon59 PM PST &NewLine &NewLineReviews&Tab3 left to complete &NewLine &NewLine &NewLine &NewLine &NewLineMisconception about The Financialization of Housing &NewLineby Vieira Harits Arkaizstammam &NewLineDecember 11&comma 2020 &NewLine &NewLine &NewLine &NewLine &NewLine &NewLinelike &NewLine &NewLine &NewLine &NewLine &NewLine &NewLineFlag this submission &NewLine &NewLine &NewLine &NewLine &NewLine &NewLinePROMPT &NewLine &NewLineHow did the learner perform on this assignment&quest &NewLine &NewLine &NewLine &NewLineDisagree&comma many entrepreneurs are leaning towards the housing sector to circulate their money safely and &NewLinemake regular profits through the interest&period In my opinion&comma these entrepreneurs can actually help the younger generation and the small community who are just working and building households to be able to buy houses cheaper&period The increase in housing prices that occurred was caused by many economic factors&comma such &NewLineas an increase in overall income&comma a decrease in interest rates&comma area desirability and increasing population so that housing demand continues to rise&period Thus&comma entrepreneurs investing in the housing sector will be able to increase housing supply and stabilize housing prices&period &NewLine &NewLine&Tab &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLinePeer-graded Assignment&colon Financialization of Housing &NewLineReview by Jan 6&comma 11&colon59 PM PST &NewLine &NewLineReviews&Tab3 left to complete &NewLine &NewLine &NewLine &NewLineUnited Nations Human Rights Council&aposs 2017 Report Review &NewLineby Joanna Makhoul &NewLine &NewLineDecember 11&comma 2020 &NewLine like &NewLine Flag this submission &NewLine &NewLine &NewLine &NewLine &NewLine &NewLinePROMPT &NewLine &NewLineHow did the learner perform on this assignment&quest &NewLine &NewLine &NewLine &NewLineI totally agree with the right to an adequate standard of living&comma and on the right to non-discrimination because in recent years the housing sector has been transformed by global financial actors and unprecedented amounts of excess capital&period It is no longer as we once knew it&period &NewLineHousing has been financialized&colon valued as a commodity rather than a human dwelling&comma it is now a means to secure and accumulate wealth rather than a place to live in dignity&comma to raise a family and thrive &NewLinewithin a community&period Housing has become security for financial instruments &ndash traded and sold on global &NewLinemarkets&period It has lost its currency as a universal human right&period The pace and extent to which financial corporations and funds are taking over housing and &NewLinereal estate and causing homelessness&comma displacement and unaffordability is staggering&period Housing prices are no longer commensurate with household income levels&comma and instead are driven by demand for housing assets among global investors&period When housing prices skyrocket&comma low and sometimes even middle-income &NewLineresidents are forced out of their communities by high &NewLinerent or mortgage costs&period When housing prices plummet&comma residents face mortgage foreclosure and homelessness&period In developing economies&comma even &NewLine &NewLine &NewLineinformal settlements are subject to speculative investment&period Residents are displaced and often &NewLinerendered homeless to make way for luxury housing that often stands vacant&period First&comma financialization undermines democratic governance and community accountability&period Second&comma financialization of housing exacerbates inequality and social exclusion&period And third&comma financialization detaches housing from its connection to communities and to the human dignity and security that are at the core of all human rights&period Financial &NewLinemarkets and global housing investments are not&comma in fact&comma beyond the control of states and international organizations&period Some States and local governments have begun to develop policy responses to the financialization of housing to at least curb its excesses&period A number of States have instituted restrictions on foreign purchasers of residential real estate and others have imposed taxes on vacant homes&period Taxes on luxury properties have also been applied with revenues used to subsidize housing for low-income households&period A number of jurisdictions have introduced a property speculation tax and others have been successful at &NewLinerequiring developers to include a proportion of affordable units&period Some local and regional governments have affirmed the social function of housing&comma facilitating temporary expropriation of vacant housing and prohibiting foreclosures and evictions that would result in homelessness&period While these and similar measures can mitigate the effects of the financialization of housing&comma a more fundamental shift is required in order for States to uphold their international human rights obligations&period States must change their relationship with the financial sector to insist that markets serve the social function of housing&period The obligations of States in relation to the financial sector have often been ignored or interpreted too narrowly&period The assumption&comma bolstered by neo-liberalism&comma that States should simply allow &NewLinemarkets to work according to their own rules&comma subject only to the requirement that private actors &OpenCurlyDoubleQuotedo no harm&rdquo and avoid explicit violations of human rights&comma is simply not sufficient to meet States&rsquo obligation to fulfil the right to adequate housing &OpenCurlyDoubleQuoteby all appropriate &NewLinemeans&comma including legislative measures&period&rdquo The State &NewLinemust regulate&comma direct and engage with private market and financial actors&comma to ensure that the rules under &NewLinewhich they operate and their actions are consistent &NewLine &NewLine &NewLinewith the realization of the right to adequate housing for all sectors of society&period States are obliged to ensure that private investors respond to the needs of residents for secure&comma affordable housing and do not cater only to the wealthy&period What I am suggesting is a significant change &NewLine&ndash a shift in paradigm away from prioritizing financial &NewLineinterests and the commodification of housing in order to retrieve what housing means in terms of human dignity and security&comma as a lived experience&comma as a &NewLineHUMAN right&period The Sustainable Development Goals and the New Urban Agenda provide an important opportunity for States to engage financial regulatory bodies and actors in the goal of adequate housing for all by 2030 as a human rights obligation&period Indeed&comma &NewLinemeeting that goal will require such engagement&period Trade and investment treaties must recognize the paramountcy of human rights and ensure that States are fully empowered to regulate and direct private &NewLineinvestment so as to ensure the realization of the right to housing&period Courts&comma tribunals and national and local human rights institutions must explicitly recognize and apply the paramountcy of human rights and interpret and apply domestic laws and policies related to housing and housing finance consistently with the right to adequate housing&period States should review all domestic laws and policies related to foreclosure&comma indebtedness as well as urban planning and housing development&comma to ensure that no eviction is permitted when there are &NewLinereasonable alternatives&comma and that housing is built for people who need it to live in&comma not for purposes of speculation and the accumulation of wealth&period Emerging work in the area of business and human rights has yet to be rigorously applied to the largest sphere of global business - the sphere of housing and real estate&period &NewLineFinancial institutions and housing investors should be encouraged to adopt guidelines that recognize the &NewLineimportant role that they must play in the realization of the right to housing&period If the New Urban Agenda and target in 11&period1 of the SDG&rsquos of adequate housing for all by 2030 is to mean anything&comma we must insist that human rights obligations be recalibrated to address the immense challenges of the financialization of housing and redirect the vast resources available toward the &NewLinerealization of the right to adequate housing&excl &NewLine &NewLine&Tab &NewLine &NewLine &NewLine &NewLine &NewLine &NewLine &NewLineModule 4 Honors Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabWhy must we consider psychological factors when speaking about housing prices&quest&Tab1 &sol 1 point &NewLine &NewLine Applying certain psychological factors can increase a portfolio&rsquos risk&period &NewLine Psychologists have developed mathematical formulas to accurately forecast housing prices&period &NewLine &NewLine Without psychological factors&comma a larger percentage of real estate prices would be determined by construction costs&period &NewLine &NewLine People behave in very predictable ways&comma so it is possible to make a lot of money by investing in real estate&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabSelect TWO important actions of the Federal Housing Administration&period&Tab1 &sol 1 point &NewLine &NewLine &NewLine Require loans to be at least 15 years&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Impose a sharp tax on real estate&period Insure lenders against losses &NewLine &NewLine Correct &NewLine &NewLine &NewLine Guarantee employment for home-owners&period &NewLine &NewLine &NewLine &NewLine3&period &NewLine &NewLineWhich of the following definitions are correct&quest &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine Fixed rate mortgages are mortgages where the interest rate does not change over time&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine An adjustable rate mortgage &lparARM&rpar does not have a fixed interest rate&comma but increases gradually over time&period &NewLine &NewLine &NewLine Shared Appreciation Mortgages &lparSAMs&rpar require you to pay some percentage of the appreciation of your house&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine Price Level Adjusted Mortgage &lparPLAMs&rpar are adjusted to inflation&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following started happening to CDOs in 2007&quest&Tab1 &sol 1 point &NewLine &NewLine Defaults started to affect the highest tranche CDOs replaced CMOs for mortgages&period &NewLine CDOs had to be bailed out by the government &NewLine AAA tranches were re-rated to be of similar risk to the lowest tranche&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhy are banks incentivized to offer Qualifying Residential Mortgages &lparQRMs&rpar&quest&Tab1 &sol 1 point &NewLine &NewLine Banks are usually in the business of initiating but not keeping mortgages&comma but QRMs are high enough quality that banks would want to keep them&period &NewLine &NewLine &NewLine QRMs are mortgages that are unlikely to default&comma so by offering them&comma banks can ensure that they will not lose large amounts of money from defaults&period &NewLine The government forces banks to offer them if they want to offer any kind of mortgage&period Banks are usually in the business of initiating but not keeping mortgages&comma so offering &NewLineQRMs allows them to sell them all to a CMO&period &NewLine &NewLine &NewLine &NewLine Correct &NewLineBanks are required to keep at least 5&percnt of their non-QRMs&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following is NOT in practice a problem with regulation&quest&Tab1 &sol 1 point &NewLine &NewLine Regulation can cause a monopoly if only one company can keep up with the expenses of complying with the regulations&period &NewLine &NewLine A lot of money is lost on paperwork for complying with regulations&period It may be possible to bribe corrupt regulators&period &NewLine Companies may be disincentivized to grow beyond a certain size to avoid extra regulations&period &NewLine &NewLine &NewLine &NewLine Correct &NewLineThis generally goes &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich of the following correctly describes a type of hedge fund&quest &lparcheck all that apply&rpar&Tab1 &sol 1 point &NewLine &NewLine &NewLine 3c1 hedge funds can take no more than 99 investors&comma each of whom must have an income of at least &dollar200&comma000 or investable assets of at least &dollar1&comma000&comma000&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine 3c3 hedge funds can take up to 999 investors&comma each of whom must be an individual with a net worth of at least &dollar10&comma000&comma000 or an organization with a net worth of at least &NewLine&dollar100&comma000&comma000&period &NewLine &NewLine &NewLine 3c7 hedge funds can take up to 500 investors&comma each of whom must be an individual with a net worth of at least &dollar5&comma000&comma000 or an organization with a net worth of at least &NewLine&dollar25&comma000&comma000&period &NewLine &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLine 3c8 hedge funds can take no more than 50 investors&comma each of whom must have an income of at least &dollar200&comma000 or investable assets of at least &dollar5&comma000&comma000&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhich is NOT true about Generally Accepted Accounting Principles &lparGAAP&rpar&quest&Tab1 &sol 1 point &NewLine &NewLine They are used for EDGAR&period &NewLine It invented the concept of Earnings Before Interest&comma Taxes&comma Depreciation&comma and Amortization &lparEBIT&rpar &NewLine &NewLine They are defined by the Financial Accounting Standards Board &lparFASB&rpar It maintains official definitions of &OpenCurlyDoubleQuotenet income&rdquo and &OpenCurlyDoubleQuoteoperating income&rdquo&comma &NewLine &NewLine Correct &NewLineThis is an important definition&comma but it is not part of GAAP &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabWhat is rating shopping&quest&Tab1 &sol 1 point &NewLine &NewLine Banks only ask low-integrity rating services to rate mortgages&period &NewLine Banks tell rating services the rating they wanted before it was rated&period &NewLine Banks ask several mortgage rating services what their rating will be on a mortgage&comma and then pick the best rating&period &NewLine &NewLine Banks stop caring about the rating anymore as long as they can find someone to buy it&period &NewLine &NewLine &NewLine Correct &NewLine &NewLine &NewLineLesson &num12 Quiz &NewLineLATEST SUBMISSION GRADE &NewLine100&percnt &NewLine &NewLine&Tab&bull&TabWhat is the effect of traders storing grain to wait for higher prices&quest&Tab1 &sol 1 point &NewLine &NewLine It is essential in preventing grain shortages&period &NewLine Most shortages could have been prevented if traders had not speculated on grain prices&period &NewLine &NewLine Most grain ends up getting moldy in storage&period Traders are able to monopolize the market&period &NewLine &NewLine Correct &NewLineIf grain were not stored&comma it would only be accessible immediately after the harvest&period This ends up accommodating supply and demand&period &NewLine &NewLine &NewLine &NewLine &NewLine&Tab&bull&TabIn commodities trading&comma what is the role of forwards and futures&quest&Tab1 &sol 1 point &NewLine &NewLine Farmers and warehouses sell exclusively in futures&period &NewLine Farmers sell in forwards and warehouses sell in fut



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