194.Suppose that Jim just got a $20,000 loan from his credit union to buy a new car. The loan is a _____ for Jim and a _____ for the credit union.A)financial asset; physical assetB)financial asset; financial assetC)financial asset; liabilityD)liability; financial asset195.Which of the following is NOT one of the three tasks of a financial system?196.Transaction costs are:Page 41
197.Financial markets make borrowing large amounts of money easier because they simplify negotiation between borrowers and lenders. This is an example of:198.A risk-averse person:A)considers any risk unacceptable.B)would never buy a financial asset.C)has an asymmetric view of the value of losses and gains.D)would never buy insurance.199.Financial markets spread the potential gains and losses of borrowing and lending operations among many individuals, therefore decreasing the overall uncertainty. This is an example of:200.The most diversified portfolio in terms of risk is $100,000 worth of stock in:201.Financial markets:202.A common strategy to reduce the risk of a large financial loss is:A)to buy and sell assets through a mutual fund, since mutual funds cannot lose money.B)to diversify financial assets so that their risks of failure are unrelated.Page 42
C)to buy financial assets from developing countries, because the rates of return are very high and safe and their national currencies are much more stable than the U.S. dollar.D)to buy real instead of financial assets.203.The best way to reduce financial risk is to:
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- Fall '06
- Macroeconomics, loanable funds, investment spending