Which of the of the following is a reason why demand for CDOs was so high prior to the financial crisis?

A. Investors sought assets perceived as safe relative to equity securities.

B. Investors sought assets with high returns and cared little for risk.

C. Investors did not feel Treasury securities were as safe as they used to be.

D. Investors were not confident about the bond ratings of other types of assets.

Solutions

Expert Solution

Option B. Investors sought assets with high returns and cared little for risk.

Explanation: Due to low market regulations and high confidence in the economy, investors assumed a higher degree of risks in order to get high returns.

Rahul Sunny answered 1 year ago

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