Finance Creative Writing Creative Writing Examples

Question 1

The subprime meltdown that got fully exposed during the latter half of the year 2007 was so severe that it led to one of the greatest, if not the greatest, global economic crisis since the great depression that happened in 1929. However, between the two, the global financial crisis that happened in 2007 that occurred as a result of the poor banking practices particularly in the subprime real estate market still pale in comparison to the global depression of 1929. The main cause of the subprime meltdown was the poor lending practices of the banks and financial institutions. In order to maximize profits, the banks tremendously increased their leverage and lent money to people who they knew would not be able to afford to pay the loans they approved. Normally, these things are regulated by the government. However, due to lack of transparency the regulating bodies were not able to put a stop to the banks and financial institutions’ illegal practices. If anything, the perfect solution that would have stopped the transition of the subprime meltdown into a full scale financial crisis was the bank and market transparency.

Question 2

A stock index is composed of a basket of stocks and not just a single stock alone. Between a basket of stocks and a single stock, the latter would more often than not appear as the more volatile option. This is because there is only one determinant to consider in the single stock option compared to the index which considers the stock price of a wide range of companies. In the case of stock indices, upward or downward price movements in one stock (which is a member of that particular index) would indeed affect the price of that stock index but if other stock components are moving at the opposite direction, then the overall stock index price may not be that significantly affected.