Financial Market - Recap

Well-functioning financial markets promote

• Unemployment

• Economic Growth

• Deflation

• Inflation

Typically, borrowers have superior information relative to lenders about the potential returns and risks associated with an investment project. The difference in information is called

• adverse hazard.

• moral selection.

• risk sharing.

• asymmetric information.

Which of the following statements about the characteristics of debt and equities is TRUE?

• They can both be long-term financial instruments.

• Bonds pay dividends

• Bond holders are residual claimants.

• The income from bonds is typically more variable than that from equities.

At the age of 30

Married with Kids

Single having a carefree life

• 
• 

When a budget deficit occurs in the United States, the U.S. Treasury finances this deficit by

• increasing the tax rate.

• printing more dollars

• imposing a moratorium of new government spending

• borrowing

A corporation acquires new funds only when its securities are sold in the

• secondary market by a commercial bank

• primary market by an investment bank and secondary market does not play any role for the companies.

• secondary market by a stock exchange broker

• primary market by an investment bank. Secondary market just improves the liquidity

Everything else held constant, a decline in interest rates will cause spending on housing to

• fall

• either rise, fall, or remain the same

• remain unchanged

• Rise

When I purchase a corporate ________, I am lending the corporation funds for a specific time. When I purchase a corporation's ________, I become an owner in the corporation.

• stock; debt security

• bond; debt security

• bond; stock

• stock; bond

Prices of short term instruments undergo the least price fluctuations because of

• the price ceiling imposed by government regulators.

• the heavy regulations in the industry.

• the lack of competition in the market.

• the short terms to maturity for the securities.

Have you subscribed to 'Drs life' YouTube Channel?

https://www.youtube.com/channel/UCz5r2TGyofdxPopQ9YBkt5g

• No, I am copying the link to do it now.

• No, I do not intend to do that.

• Yes.

• Yes and I got my friends to do so.