Question 1

The two types of asymmetric information problems are adverse selection and moral hazard.

Accepted Answer

A) True 
 B)False

Question 2

When venture capitalists take an active role in the management of a company they finance, they are trying to alleviate the moral hazard problem.

Accepted Answer

A) True 
 B)False

Question 3

Transactional costs are any and all costs associated with completing an exchange.

Accepted Answer

A) True 
 B)False

Question 4

Spinning, in relation to IPOs, is a practice that hurts

Accepted Answer

A)  underwriters. 
B)  investors. 
C)  the company going public. 
D)  all of the above. 
A)  underwriters. 
B)  investors. 
C)  the company going public. 
D)  all of the above.

Question 5

The cost of accounting fees is an example of a transactions cost that banks can deal with more efficiently than individuals.

Accepted Answer

A) True 
 B)False

Question 6

The free-rider problem affects the

Accepted Answer

A)  stock market. 
B)  corporate bond market. 
C)  both of the above. 
D)  neither of the above. 
A)  stock market. 
B)  corporate bond market. 
C)  both of the above. 
D)  neither of the above.

Question 7

Transactions costs are

Accepted Answer

A)  broker commissions. 
B)  legal fees. 
C)  monitoring costs. 
D)  all of the above. 
A)  broker commissions. 
B)  legal fees. 
C)  monitoring costs. 
D)  all of the above.

Question 8

Which are examples of external finance?

Accepted Answer

A)  issuing commercial paper 
B)  stock sales 
C)  issuing bonds 
D)  all of the above 
A)  issuing commercial paper 
B)  stock sales 
C)  issuing bonds 
D)  all of the above

Question 9

What transactions cost could arise from screening?

Accepted Answer

Banks must hire peop

Question 10

Credit rationing means that banks refuse to lend above a certain interest rate. Why would they do this? What does this policy have to do with adverse selection or moral hazard?

Accepted Answer

Borrowers who are willing to t

Question 11

During the housing crisis of 2008, many homeowners went "under water," meaning their home is worth less than the value of their mortgage. What solution to asymmetric information problems is affected? Why is this a problem for lenders?

Accepted Answer

The value of the collateral is the value

Question 12

What are stock options?

Accepted Answer

Stock options are a type of co

Question 13

Most external financing comes from bonds and equities.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a technique lenders use to alleviate the moral hazard problem?

Accepted Answer

A)  checking credit ratings 
B)  monitoring borrower activity 
C)  restrictive covenants 
D)  all of the above 
A)  checking credit ratings 
B)  monitoring borrower activity 
C)  restrictive covenants 
D)  all of the above

Question 15

What are restrictive covenants? Are they directed at adverse selection or moral hazard problems?

Accepted Answer

Restrictive covenants are lega

The two types of asymmetric information problems are adverse selection and moral hazard.

When venture capitalists take an active role in the management of a company they finance, they are trying to alleviate the moral hazard problem.

Transactional costs are any and all costs associated with completing an exchange.

Spinning, in relation to IPOs, is a practice that hurts

The cost of accounting fees is an example of a transactions cost that banks can deal with more efficiently than individuals.

The free-rider problem affects the

Transactions costs are

Which are examples of external finance?

What transactions cost could arise from screening?

Credit rationing means that banks refuse to lend above a certain interest rate. Why would they do this? What does this policy have to do with adverse selection or moral hazard?

During the housing crisis of 2008, many homeowners went "under water," meaning their home is worth less than the value of their mortgage. What solution to asymmetric information problems is affected? Why is this a problem for lenders?

What are stock options?

Most external financing comes from bonds and equities.

Which of the following is a technique lenders use to alleviate the moral hazard problem?

What are restrictive covenants? Are they directed at adverse selection or moral hazard problems?

The Financial System

Money

Interest Rates

The Economics of Interest-Rate Fluctuations

The Economics of Interest-Rate Spreads and Yield Curves

Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Bank Management

Innovation and Structure in Banking and Finance

The Economics of Financial Regulation

Financial Derivatives

Financial Crises: Causes and Consequences

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Tools

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

Is-Lm

Is-Lm in Action

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

Inflation and Money

Rational Expectations Redux: Monetary Policy Implications

Filters

Exam 8: Financial Structure, Transaction Costs, and Asymmetric Information

The two types of asymmetric information problems are adverse selection and moral hazard.

When venture capitalists take an active role in the management of a company they finance, they are trying to alleviate the moral hazard problem.

Transactional costs are any and all costs associated with completing an exchange.

Spinning, in relation to IPOs, is a practice that hurts

The cost of accounting fees is an example of a transactions cost that banks can deal with more efficiently than individuals.

The free-rider problem affects the

Transactions costs are

Which are examples of external finance?

What transactions cost could arise from screening?

Credit rationing means that banks refuse to lend above a certain interest rate. Why would they do this? What does this policy have to do with adverse selection or moral hazard?

During the housing crisis of 2008, many homeowners went "under water," meaning their home is worth less than the value of their mortgage. What solution to asymmetric information problems is affected? Why is this a problem for lenders?

What are stock options?

Most external financing comes from bonds and equities.

Which of the following is a technique lenders use to alleviate the moral hazard problem?

What are restrictive covenants? Are they directed at adverse selection or moral hazard problems?

The Financial System

Money

Interest Rates

The Economics of Interest-Rate Fluctuations

The Economics of Interest-Rate Spreads and Yield Curves

Rational Expectations, Efficient Markets, and the Valuation of Corporate Equities

Bank Management

Innovation and Structure in Banking and Finance

The Economics of Financial Regulation

Financial Derivatives

Financial Crises: Causes and Consequences

Central Bank Form and Function

The Money Supply Process and the Money Multipliers

Monetary Policy Tools

Monetary Policy Targets and Goals

Foreign Exchange

International Monetary Regimes

Money Demand

Is-Lm

Is-Lm in Action

Aggregate Supply and Demand and the Growth Diamond

Monetary Policy Transmission Mechanisms

Inflation and Money

Rational Expectations Redux: Monetary Policy Implications

Filters