The fact that the credit-rating agencies both advised clients on how to structure the financial instruments that paid out cash flows from subprime mortgages and also rated these financial instruments contributed to the
A)subprime financial crisis that began in 2007.
B)Enron collapse.
C)demise of Arthur Andersen.
D)technology bust.

Question

Quizplus · Accepted Answer

The credit-rating agencies both provided advice on how to structure financial instruments and rated these instruments. This conflict of interest led to these financial instruments being overvalued and ultimately contributing to the subprime financial crisis in 2007. The other choices (Enron collapse, demise of Arthur Andersen, technology bust) were not directly related to the role of credit-rating agencies in the subprime financial crisis.

The Fact That the Credit-Rating Agencies Both Advised Clients on How