Reasons for Financial Crisis 2008:

Details about Financial Crisis 2008 & US Mortgage Subprime Crisis:
Analysis of Economic Crisis in 2008

The present finacial crisis in the world is attributed by the mortgage subprime crisis of US with large number of people turning into defaulters.

Before going into detailed root cause analysis of the crisis I will like to make you familiar with some of the terminologies:

  • Mortgage: Conditional transfer of a property as for security on a loan.
  • Subprime Loans: Loans which are issued with little or no downpayments.
  • Foreclosure:If a borrower fails to make timely mortgage payments to the loan servicer (a bank or other financial firm), the lender can take possession of the residence acquired using the proceeds from the mortgage, in a process called foreclosure.

Lets get to the roots of this crisis...

Though the subprime crisis became apparent in the year 2007 but it's roots lies in closing few years of 20th century. Due to faulty government policies, competitive pressure and greediness to show higher results banker's encouraged higher risk lending practices.

Many subprime mortgages were issued in USA to households with low incomes and assets, and with troubled credit histories. All such loans were issued for the purchase of residences ,to borrowers who do not meet the usual criteria for borrowing at the lowest prevailing market interest rate. Now with the decline in USA house prices in 2006-07 the financial firms who had issued subprime mortgages lost most of their value due to falling house prices..

This resulted in a large decline in the capital of many banks and USA government sponsored enterprises, tightening credit around the world and eventually resulted in the prevailing financial crisis across the world..

The main cause for the crisis could be attributed to a number of factors:
1. Inability of homeowners to make their mortgage payments
2. poor judgment by borrowers and/or lenders
3. speculation and overbuilding during the boom period
4. risky mortgage products,
5. high personal and corporate debt levels,
6. financial products that distributed and perhaps concealed the risk of mortgage default,
7. monetary policy, and
8. lack of proper government regulation

In its "Declaration of the Summit on Financial Markets and the World Economy," dated 15 November 2008, leaders of the Group of 20 cited the following causes:
"During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions."

The impact of this crisis could have been subdued if proper measures were taken on time.

Result of CAT 2008

Result of CAT 2008 exam held on Nov 16 2008 is going to be announced on 9th January 2009 (Friday).

How to check your CAT score through SMS?
The SMS facility to check your CAT results is really simple and fast way to view your CAT scores.
Below are the deatils how to see your CAT 2008 results using SMS:
CAT score using test registration number & Date of birth
Type CAT and SMS to 57333
Example
Type following text in your mobile :
CAT 5370082 150383 and SMS to 57333

CAT score using test registration number & application number
Type CAT and SMS to 57333
Example
Type following text in your mobile :
CAT 5370082 123456 and SMS to 57333



Important Facts about CAT 2008
Total no. of CAT Exam takers in 2008: 2,50,000
Last year, about 2.12 lakh candidates had appeared for the CAT. In 2008 the no. of CAT aspirants has jaumped by nearly 50000.

Total no. of seats for PGDBM in7 IIMs is : 1,600
1,600 postgraduate diploma in management seats in the seven IIMs - Ahmedabad, Bangalore, Kolkata, Indore, Kozhikode, Lucknowa and Shillong. (ANI)
Students qualifying the test will be eligible for admission into IIMs at Ahmedabad, Bangalore, Kolkata, Indore, Kozhikode, Lucknow and Shillong. Besides, six new IIMs are expected to start functioning next year.



All the best!

Group Discussion: Pour your thoughts-2


Group Discussion & Personal Interview plays an important role in the admission process for most of the MBA colleges.

Apart from being able to communicate fluently what matters the most is the thoughts which you put in your speech.

Here is an oppurtunity to share your thoughts and also to know about more opinions and ideas on various topics.

Please feel free to pour in your thoughts in commnets below .....Be assured there would be surprise rewards to all those who participate :)

The Topic is:

"Present Economic Crisis: Reasons and Solutions"
Pointers:
Sub Prime Crisis in US,
Greed for showing Higher results by Financial Institutions
Anticipation of the crisis could have helped many.

As there were no responses on this topic , I am sharing details about the "Prevailing Financial crisis in world" just to make you aware of it.
Read it here:
http://howtoprepare4cat.blogspot.com/2008/12/reasons-for-financial-crisis-2008.html

This discussion is closed now.



Post your ideas below in commnets .

MBA Full Length Tests

Series of Full Length mock tests for MBA

Download MBA Full Length Test1 (with answers)

Coming up more....

CAT FULL LENGTH TEST 1 : ANSWERS








MBA Preparation Materials & tips
http://howtoprepare4cat.blogspot.com/2007/12/resourcespast-papers.html



CAT FULL LENGTH TEST 1 :
EXPLANATORY ANSWERS



 


1] A & C Hence, [3]



2] A only Hence [3]



3] D only Hence [2]



4] D only Hence [3]



5] He could not convince the doubting audience.
Hence [4]



6] Withering away of religion as a significant
element. Hence [2]



7] Concentrating on creating European links.
Hence [4]



8] Spontaneous recognition from supervisors and
managers.Hence [3]



9] May also be well advised. Hence [1]



10] Demonstrate their strength. Hence
[2]



11] String of commentaries on .Hence
[4]



12] The passage of time, curse. Hence
[3]



13] Rural, restructure Hence [4]



14] Superficial attempt at liberalisation.
Hence [1]



15] Ideological, cultural. Hence [4]



16] Irony, intends Hence [2]



17] Inspiring,win Hence [4]



18] Fascinated, oddballs. Hence [3]



19] Excitement, applause. Hence [1]



20] 2,does not



21] 5



22] 4, drop ‘a’



23] 4, drop ‘the’



24] 3, drop ‘the’



25] 5



26] 1, was nearly pink



27] 5



28] 4, the book



39] 4, was



30]5



31. 2, is



32. 2, with



33. 5



34. 2, for



35. 2, of



36. 4, for



37. 3, are



38. 4, was



39. 5



40. [4]



41. [4]



42. [2]



43.  [2]



44.  [1]



45.  [3]



46. [2]



47.  [3]



48. [4]



49. [2]



50. [1]



51. [3]



52. [3]



53. [4]



54. [4]



55. [3]



56. [4]



57. [2]



58. [4]



59. [2]



60. [2]


  1. Let the selling price be S .

  2. Cost price = C = 0.5S

    Profit = 0.5S

    0.5S = 60

    S = 120


  3. In one day A can do 1/1 work

  4. In one day B can do 1/12 work

    In one day A+B =1/10+1/12

    =22/120 =11/60

    =60/11 = 5 5/11


  5. Let the fraction be a/b

  6. b = a+5 --I

    Also, a/b+7 =1/4

    4a = b+7 --II

    Solving I+II,

    -a+b = 5

    4a-b = 7

    3a = 12

    a = 4, therefore b = 9


  7. 45, 54

  8. sum = 45+54 = 99


  9. Let the number be x

  10. 2x-1/2x = 30

    3/2x = 30

    3x = 60

    x = 20


    66. 20x+10y = 200 --I

    x+y = 15 --II

    20x+10y =200

    (-)10x+10y = 150

    10x = 50

    x = 5






67. Apples         
Bananas        

        3                  
2

         15


15*2/3 = 10 Bananas





  1. cost exclusive of excise and tax = x

  2. excise = 0.12

    Tax= 0.04

    X+0.16x = 600

    X = 600/1.16

    = 517.24



  3. x has Rs. 6.

  4. 2/3 of x = 2/3*6 = Rs. 4

    Rs. 4 = ¼ y

    Y = 4*4 = 16


  5. x+1/x = ½

  6. (x+1/x)2 = x2 + 2x1/x +
    1/x2

    = x2 +2 +1/x2

    = x2 + 1/x2 + 2

    = ¼+2

    =1+8/4

    = 9/4



  7. x will complete 1/20 in one day.

  8. Y will complete 1/30 in one day.

    Z will complete 1/60 in one day.

    4 days = (1/20 + 1/30 + 1/60)*4

    = (3+2+1/60)*4

    = 6/60*4

    = 4/10

    = 2/5th complete

    6 days = (1/20 + 1/60)*6

    = (3+1/60)*6

    = 4/60*6

    = 4/10 = 2/5

    total work complete = 2/5+2/5 = 4/5

    work remaining = 1/5

    1/5/1/20=1/5*20/1

    = 4 days



  9. volume increase in cylinder=(volume of block
    *portion of it which is immersed)

  10. 22/7*62*4 = 5*6*7( p)

    p = 22/7*36*4

               5*6*7


    p = 22/7*24/35





  1. Let the number be x.

  2. X2-x = 870

    X2-30x+29x-870 = 0

    (x-30)(x+29) = 0

    x = 30



  3. Let the no. of eligible voters = x

  4. Then, (0.6)(.6x) = 53040

    0.36x = 53040

    x = 54000/0.36

    x = 150000



  5. Let side of the square be x.

  6. (x+3)2 = x2 + 33

    x2+6x+9=x2+33

    6x=24

    x=4



  7. A:B is 10:7.5

  8. B:C is 10:9

    A:B:C is 100:75:90

    C gets 90*88000/265=29887



  9. Expensive brand cost = 20*60=1200

  10. Expense now = 1200-450=750

    Average cost of the mixture =750/20

    Rs.30 Rs. 60

    Rs. 750/20

    450/20 150/20

    3:1



  11. Instalments paid = 1575+1575 = 3150

  12. Interest = 3150-3000 = 150

    For 2 months interest = Rs.150

    Rate of interest 2.5%p.m.

    Rate of interest p.a. = 12*2.5 = 30%



  13. 4-2.8+3.5-1+x=5

  14. x=5-4+2.8-3.5+1

    =1.3



  15. Let the marked price be 100.

  16. Selling price =60

    Commission = 3/100*60 = 1.8

    Commission(%) Commission(Rs).

    1.8                         
    12

    100                          
    ?





100*12/1.8=666.67





  1.         
    3:2:1


  2. 1.5*12+1.5*4:2*12:1*12

    18+6:24:12

    24:24:12

    2:2:1

    1800/5*2

    360*2

    Rs.720.



  3.     By alligation rule:

      10                               
    5



                      
825/100



           
13                                 
7





No. of 5 paise = 100/20*13

= 65 coins

No. of 10 paise =100/20*7

=35 coins






      83. By
alligation rule:

    & [2]



163.Production in 1998=456000 units



Sales=433200 units



Sales revenue=433200*6=2599200



Therefore advt. expense=2599200*4.33%



=112,545



Hence [1]



164. Inventory for 1994



Production in '94=330,000



Sales=297,000 therefore inventory=33,000



Inventory for 1995



Production in 1995=340,000



Sales in 1995=306,000 therefore inventory=34000



Sales for 1996=360000



Total sales=360000+34000+33000=427000 units



Hence [1]



165. Market share=80/4=20%



Sales revenue=345,800*5=1729000



Therefore market =1,729,000/0.20=86.45lac



Hence [2]



166. Answer is [2]



167.Answer is [1]



The following table can easily explain
questions 168 to 172


















Names Arti Banti Chetan Dolly
Amount Rs38.4 Rs11.6 Rs16.6 Rs33.4


168.[1]  169.[2]  170.[3] 
171.[3]  172.[1]



173. While X=0, Y=5, A=3, B=5



While X=2, Y=8, A=5, B=8



While X=4, Y=13, A=8, B=13



Hence [3]



174. While X=0, Y=5, A=3, B=5



If X is increased by 5 further values of Y will
not be calculated.



Hence [1]



175. The last value of X is 4



Hence [2]



The following table explains the
questions171 to 180








































Husband Wife Surname Office
Jai Beena Parikh Air India
Girish Maya Sahni Indian Court
Jayesh Chand Natwar Ashiana
Bala Preeti Bakshi American Court
Pratap Sangeeta Joshi Jet


176. [4] 177. [4] 178. [4] 179. [3] 180. [3]



The following table explains the
questions 181 to 185


















1 2 3 4 5
B E A D C

181. [3] 182. [4] 183. [2] 184. [1] 185. [3]





Unlimited MBA Preparation Materials & tips
http://howtoprepare4cat.blogspot.com/2007/12/resourcespast-papers.html




 




General Knowledge: Test yourself

Being aware of the General happenings in and around you really puts you ahead of others.
Be it the personal Interview or the Group discsussion or any general team meeting, your general awareness will play a major role in defining your persona.

Here is a the first Quiz of the series to test your skills:

Click to enlarge

Post your answers to above quiz below as comments.
Eg 1 A , 2 B....


To regularly recieve GK updates, MBA Updates & answers to above quiz plz provide your email id in the text box below.

Group Discussion: Pour your thoughts


Group Discussion & Personal Interview plays an important role in the admission process for most of the MBA colleges.

Apart from being able to communicate fluently what matters the most is the thoughts which you put in your speech.

Here is an oppurtunity to share your thoughts and also to know about more opinions and ideas on various topics.

Please feel free to pour in your thoughts in commnets below .....Be assured there would be surprise rewards to all those who participate :)

The Topic is:
Indian Politicians are hypocrites & a threat to the nations growth.


Post your ideas below in commnets .

Enter your Email to Subscribe