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
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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
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