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Question 32 The phrase, "bad risks drive good risks out of the market" refers to the effect of which of the following? O a. Arbitrage

Question 32 The phrase, "bad risks drive good risks out of the market" refers to the effect of which of the following? O a. Arbitrage

Essentials Of Investments
Essentials Of Investments
11th Edition
ISBN:9781260013924
Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.
Chapter1: Investments: Background And Issues
Section: Chapter Questions
Problem 1PS
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Question 32 The phrase, "bad risks drive good risks out of the market" refers to the effect of which of the following? O a. Arbitrage Ob. Transactions costs. O c. Adverse selection O d. Moral hazard Oe. None of the above. Question 33 Which of the following can best explain the reasons for the particular structures of financial systems in the U.S. and other countries? O a. Mispricing of risk by financial investors O b. Transactions and information costs O c. Arbitrage activities of investors O d. Lax banking regulations Oe. None of the above.
Transcribed Image Text:Question 32 The phrase, "bad risks drive good risks out of the market" refers to the effect of which of the following? O a. Arbitrage Ob. Transactions costs. O c. Adverse selection O d. Moral hazard Oe. None of the above. Question 33 Which of the following can best explain the reasons for the particular structures of financial systems in the U.S. and other countries? O a. Mispricing of risk by financial investors O b. Transactions and information costs O c. Arbitrage activities of investors O d. Lax banking regulations Oe. None of the above.
Question 30 The U.S. financial data indicate that: O a. Stocks are more important sources of external financing for businesses compared to bonds. O b. Stocks and bonds combined are more important sources of external financing for businesses compared to loans from financial intermediaries. O c. Loans from financial intermediaries are more important sources of external financing for businesses compared to stocks and bonds. O d. Bank loans are more important sources of external financing for businesses compared to nonbank loans. Oe. None of the above statements is generally true. Question 31 Which of the following statements is generally true (in the era of scarce reserves)? O a. If the Fed tries to stabilize the federal funds rate, the total amount of federal funds (bank reserves) will also become more stable. b. If the Fed tries to stabilize the total amount of federal funds (bank reserves), the federal funds rate will also become more stable. O c. If the Fed tries to stabilize the federal funds rate, the total amount of federal funds (bank reserves) will become more unstable. O d. If the Fed tries to stabilize the federal funds rate, the short-term interest rates will become more unstable. Oe. If the Fed tries to stabilize the total amount of federal funds (bank reserves), both M1 and M2 money supplies will become more unstable.
Transcribed Image Text:Question 30 The U.S. financial data indicate that: O a. Stocks are more important sources of external financing for businesses compared to bonds. O b. Stocks and bonds combined are more important sources of external financing for businesses compared to loans from financial intermediaries. O c. Loans from financial intermediaries are more important sources of external financing for businesses compared to stocks and bonds. O d. Bank loans are more important sources of external financing for businesses compared to nonbank loans. Oe. None of the above statements is generally true. Question 31 Which of the following statements is generally true (in the era of scarce reserves)? O a. If the Fed tries to stabilize the federal funds rate, the total amount of federal funds (bank reserves) will also become more stable. b. If the Fed tries to stabilize the total amount of federal funds (bank reserves), the federal funds rate will also become more stable. O c. If the Fed tries to stabilize the federal funds rate, the total amount of federal funds (bank reserves) will become more unstable. O d. If the Fed tries to stabilize the federal funds rate, the short-term interest rates will become more unstable. Oe. If the Fed tries to stabilize the total amount of federal funds (bank reserves), both M1 and M2 money supplies will become more unstable.
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