If the value of the financial sector is in terms of reducing the individual

income risk in the economy, how could you measure the value of the

financial sector without using the information on loan payments (broadly

construed to include any interest payment necessary to measure an interest rate or any payment that looks like a return on investment)?

If we think of the amount of individual income risk remaining after individuals buy portfolios is a measure of the ineffectiveness of the financial

sector [or its imperfections], what do you think accounts for these imperfections? [Hint: The language in the second part of this question

clearly gives you a hint at a way of answering the first part. Read each

word carefully and take the phrase" individual income risk remaining

after individual buy portfolios" very seriously. Also, remember that risk

is measured through variances.