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debt. Clearly C is the only answer that is consistent with the matching principle. See page 15.
A financial crisis that affected several Asian countries in the late 1990s began when the value of the Thai
baht fellA) excessive after it was floated. Which of the following factors were later identified as being common
significantly bank credit encouraged over-investment in assets such as office buildings
to the countries affected by this crisis?
B) reliance on external borrowing that was not hedged against foreign exchange risk
C) significant capital outflows when the confidence of external investors fell
D) for International
Feedback: The Bank all of the above Settlements identified several weaknesses that were common to the
countries that were worst affected by the Asian financial crisis of the late 1990s. These weaknesses included all
the items listed in A, B and C making D the answer. See page 40. 1hapter 01no
Any asset may be regarded as a package of attributes. Which of the following contains the greatest number
of such attributes?
A) return, risk, time pattern of cash flows
B) yield, liquidity, tax effectiveness, time pattern of cash flows
C) return, risk, liquidity, time pattern of cash flows
Feedback: Assets can be regarded as having four main characteristics that are important to the owner or to a
D) consumption, (or yield), risk, risk, liquidity
potential buyer. These are: return return, flexibility, liquidity and the time-pattern of the cash flows (or returns) that
the asset is expected to provide. Only C contains all four of these characteristics, making it the correct answer.
See page 7. 2
The typical person is assumed to:
A) like return, liquidity and risk
B) like return and liquidity but refuse to accept risk
C) like return, dislike risk and have no concern about liquidity
Feedback: Return and liquidity are both asset characteristics that will generally be preferred by investors who
D) like return and liquidity but dislike risk
are also assumed to be...
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