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3. Why do you think it is difficult for investors to assess the financial condition of a financial institution that has purch

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Answer #1

Investors are not that educated and aware about complex financial securities . Mortgage based securities on the prima facie, looks like a highly secure asset which is backed is mortgage and they feel like it is not going to lose much value.

Investors can not easily access the complexity of the constitution of mortgage backed securities and type of risks it is exposed to.

Mortgage backed securities are exposed to various type of credit risks which are not easily ascertainable by common investors. They feel like company is highly secured and hedged but they cannot easily guess the financial mayhem it can cause.

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