What was the Bretton Woods currency system?
What will be an ideal response?
In the Bretton Woods System, in place between 1944 and 1971, the participating countries agreed to an exchange rate regime that linked their exchange rates to the dollar. They could fluctuate in a 1% band around a fixed parity. The dollar itself had a fixed gold parity ($35 per ounce). When a country ran into a temporary balance of payments problem (a current account deficit) that threatened the currency peg, it could draw on the lending facilities of the IMF, also established at Bretton Woods in 1944, to help it defend the currency. Countries were also allowed to change their parities when their balances of payments were considered to be in "fundamental disequilibrium." The system broke down when President Nixon abandoned the U.S. commitment to exchange dollars for gold in August 1971.
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The increased opportunity for a bank to securitize loans into liquid and tradable assets is likely to affect which type of risk?
A. Sovereign risk. B. Market risk. C. Insolvency risk. D. Technological risk. E. Interest rate risk.
Asset backed securities (ABS)are relatively safe investments because
A) they are collateralized only with the highest quality loans. B) because the debt pools are highly diversified. C) because the pool of assets backing the securities is often much larger than the bond issue. D) because the loans in the pool are collateralized with valuable assets such as cars and trucks.