Asymmetric Information in financial markets is a potential problem resulting from: Select one: O a. The borrowers having more information than the lenders, and not disclosing this information. O b. The lenders having more information than borrowers and not disclosing this information O c. both parties having imperfect information about each other O d. unequal information on both sides before a transaction O e. none of the above Which of the following cases is more likely to lead to a moral hazard problem? Select one: O a. denying health insurance coverage on pre-existing conditions O b. requiring a large collateral before granting a loan O c. guaranteeing the repayments of all debts no matter what O d. allowing large banks that are systemically important to fail O e. all of the above The latest information available about a firm in financial markets is summarized in: Select one: O a. Ratings provided by Bond rating agencies O b. the price of its shares O c. detailed reports to regulators and shareholders O d. annual reports of the central banks A primary financial market is: Select one: O a. where the prime rate of interest applies. O b. where funds are raised for the first time O c. where Treasury bonds are traded. O d. where only the highest investment grade securities are traded O e. none of the aboveWhich of the following would NOT be an example of a secondary market transaction? Select one: O a. You call a broker and purchase 100 shares of Mcdonalds Corp. stock. O b. You go to the bank and purchase a $5000 certificate of deposit. O c. You call a broker and sell a U.S. Treasury bond. O d. Microsoft's shares get traded on the stock exchange O e. All of the above are secondary market transactions. Which of the following does not apply to the stock of a company? Select one: O a. it can be issued in the primary markets O b. it can trade on the OTC markets O c. it can trade in the stock exchange O d. it can trade in money markets O e. it is a capital market security Debt instruments with long maturities are traded in: Select one: O a. The primary market exclusively. O b. Capital markets O c. Stock exchanges O d. The money market. O e. none of the above Guaranteeing a price for a corporation's new shares is called Select one: O a. hedging O b. financial insurance O c. underwriting O d. intermediation O e. dealingFinancial markets in which only short term securities ( generally less than one year ) are traded Select one: O a. primary market O b. secondary market O c. capital market O d. debt market O e. money market A market in which dealers with an inventory of securities stand ready to buy and sell securities Select one: O a. primary markets O b. secondary markets O c. stock markets O d. money markets O e. capital markets A market in which securities represent the contractual obligations of the borrowers to the lenders. In these markets, the timing of the payments and the amounts are known with certainty. Select one: O a. capital markets O b. money markets O c. secondary markets O d. debt markets O e. equity markets A market in which funds are raised for the first time Select one: O a. primary market O b. stock market O c. secondary market d. money market O e. capital markets debt markets O g. over the counter marketsCanadian bonds are mostly traded in Select one: O a. over-the-counter O b. an organized exchange O c. secondary markets O d. primary markets O e. money markets is a problem associated with asymmetric information in the financial markets. ---- a transaction occurs Select one: O a. adverse selection, after O b. adverse selection, before O c. moral hazard, after O d. moral hazard, before O e. band c both Money Market securities include: Select one: O a. Treasury bonds, Commercial paper and interbank loans O b. Treasury bills, commercial paper, repurchase agreements, stocks O c. Treasury notes and Negotiable Certificates of deposit O d. Treasury bills ,Negotiable Certificates of deposit, commercial paper O e. Treasury bills and bonds and commercial paper Canadian government T-Bills Select one: O a. are riskier than corporate bonds. O b. make no interest payments O c. are the least liquid of the money market securities O d. are the safest of all money market instruments O e. are the safest of all capital market instruments.Which of the following are traded in capital markets? SEIBCE one: (x n, r' O (x .- a. b. .' G. d. .- e. T- bills Currencies Repurchase agreements Corporate bonds and bills Corporate bonds and stocks Secondary markets are important because: Select one. r\". (x r". r'. r\". a. .- b. c. They increasethe rate of return on assets They lower the risk of the asset They increasethe liquidity of the asset They provide bench mark prices for new issues of securities They provide bench mark prices for new issues of securities, they increase liquidity. and they can be a source of intormation for market participants If you buy a security in the secondary market. the corporation that issued the security Select one: D (x q r". a, .- b. c. acquires no new funds is paying the transaction costs increases its equity has more obligations to pay dividends gains new sources of funding it can use to expand its operations Once a Financial institution has become" too big to foil" Select one: r' r\". r\". r\". r'. .' O. b. You have the problem of adverse selection You have the problem of moral hazard You have no principal agent problem You have a problem of impertect information All apply Once a financial institution has become * too big to fail" Select one: O a. You have the problem of adverse selection O b. You have the problem of moral hazard O c. You have no principal agent problem O d. You have a problem of imperfect information O e. All apply Which of the following is an example of indirect finance Select one: O a. Banks lending to each other in the overnight market O b. General Motors lends funds to IBM O c. Joe borrows from his uncle O d. A business borrows money from a bank O e. None of the above Debt securities issued by the Canadian government in maturities of 3, 6 and 12 months are: Select one: O a. Commercial paper O b. T-bills O c. Repurchase Agreements O d. Treasury bonds O e. Treasury notes Judy and Mike both plan to buy life insurance. Judy does extreme and dangerous sports, while Mike is more likely to take up dangerous sports if he has insurance. From the perspective of the insurance company: Select one: O a. Judy represents the problem of moral hazard while Mike represents the problem of adverse selection. O b. Judy represents the problem of adverse selection while Mike represents the problem of moral hazard O c. Both are examples of moral hazard O d. Both are examples of adverse selectionRead the following article on the site below and answer the next 4 questions: http://www.economist.comews/finance-and-economics/21584984-warning-bonds-linked-cigarette-sales-may-be-harmful-your-wealth-unlucky Tobacco bonds are an example of Select one: O a. asymmetric information O b. Adverse selection O c. Securitization O d. Principal agent problems O e. None of the above What may be the advantage of issuing tobacco bonds, for the states? Select one: O a. They pay high interest rates O b. They are a means by which investors can diversify their portfolios O c. They allow states to have earlier access to funds O d. They are a tool of risk reduction for states O e. All of the above Why has the status of the bonds been reduced to 'junk bonds"? Select one: O a. Because they have a higher default possibility O b. Because sales of tobacco have declined O c. Because they are backed by states O d. All of the above could apply O e. A and B only Why might investors want to hold tobacco bonds? Select one: O a. because they pay high interest rates O b. because they are a way to diversify their holdings O c. because some of the bonds were backed by the states O d. all of the above could apply