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
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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
The process of calculating what dollars received in the future are worth today is called ().
A. calculating the yield to maturity
B. discounting the future
C. compounding the future
D. compounding the present
The interest rate that equates the present value of the cash flow received from a debt instrument with its market price today is the ().
A. simple interest rate
B. discount rate
C. yield to maturity
D. real interest rate
The yield to maturity of a one-year, simple loan of $400 that requires an interest payment of $50 is ().
A. 5%
B. 8%
C. 12%
D. 12.5%