Financial markets improve economic welfare because ().
A. they allow funds to move from those without productive investment opportunities to those who have such opportunities
B. they allow consumers to time their purchases better
C. they weed out inefficient firms
D. they do A and B of the above
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Financial intermediaries ().
A. exist because there are substantial information and transaction costs in the economy
B. improve the lot of the small saver
C. are involved in the process of indirect finance
D. do all of the above
Through risk-sharing activities, a financial intermediary ________ its own risk and ________ the risks of its customers.
A. reduces; increases
B. increases; reduces
C. reduces; reduces
D. increases; increases
The presence of ________ in financial markets leads to adverse selection and moral hazard problems that interfere with the efficient functioning of financial markets.
A. noncollateralized risk
B. free-riding
C. asymmetric information
D. costly state verification
If a $5,000 coupon bond has a coupon rate of 13 percent, then the coupon payment every year is ().
A. $650
B. $1300
C. $130
D. $13