Which of the following is a contractual saving institution?
A life insurance company
B. A credit union
C. A savings and loan association
D. A mutual fund
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Which of the following can be described as involving indirect finance?____________
A bank buys a U.treasury bill from one of its depositors
B. A corporation buys commercial paper issued by another corporation
C. A pension fund manager buys commercial paper in the primary market
D. Both A and C
The purpose of diversification is to ________________.
A. raise the volatility of a portfolio’s return
B. reduce the volatility of a portfolio’s return
C. reduce the average return on a portfolio
D. raise the average return on a portfolio
An investor who puts all the funds into one asset _____________her portfolio’s ____________.
A. increases; diversification
B. increases; average return
C. decreases; diversification
D. decreases; average return
Successful financial intermediaries have higher earnings from their investments because they are better equipped than individuals to screen out good from bad risks, thereby reducing losses due to ______________.
A. moral hazard
B. adverse selection
C. bad luck
D. financial panic