Font size
WorksheetsAnalysis of Financial System
Total questions: 10
Worksheet time: 5mins
This splitting of wealth into many assets to reduce risk
Diversification
Risk sharing
Liquidation
Risk
The financial system has increased the liquidity of many assets besides stocks and bonds through the process of __________
Diversification
Securitization
Risk
Information
A third service of the financial system is the collection and communication of __________ or facts about borrowers and expectations of returns on financial assets.
information
Sharing
Data
Resources
This is the problem investors experience in distinguishing low-risk borrowers from high risk borrowers before making an investment
Liquidation
Information
Moral hazard
Adverse selection
This is the problem investors experience in verifying that borrowers are using their funds as intended.
Moral hazard
Adverse selection
Liquidation
Adverse information
Moral hazard arises because of ________________________
Symmetric information
Asymmetric information
Data
Moral Hazard
An institution that requires the publicly traded firms report their performance in financial statement, such as balance sheet, which shows the value of the firms assets, liabilities and stockholders' equity and income statements,
BIR
SEC
BSP
BAP
How Financial Intermediaries Reduce Adverse Selection
Collecting information on firms and buying that information to investors.
Collecting information on firms and selling that information to investors.
Collecting information on inventors and selling that information to firms
Collecting information on depositors and selling that information to investors.
It may involve placing limitations on the uses of funds borrowed or requiring the borrowers to pay off the debt even before maturity date if the borrower's net worth drop below a certain level.
Restrictions
Restrictive covenants
Restrictive agreements
binding agreements
How Financial Intermediaries Reduce Transaction Costs
Financial intermediaries can also take advantage of economies of scale in other ways.
Financial intermediaries can also take advantage of dis-economies of scale in other ways.
Financial intermediaries can also take disadvantage of economies of scale in other ways.
Financial institution can also take advantage of economies of scale in other ways.
