Exam 5: Understanding Risk

Considering leverage, can you explain why a mortgage lender would want borrowers to have larger down payments, and when the borrower doesn't the mortgage lender may require mortgage insurance?

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Question 101

Uncertainties that are not quantifiable:

(Multiple Choice)

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Question 102

What is the probability of tossing a pair of dice once and getting a 1? How about a 7?

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Question 103

Sometimes spreading has an advantage over hedging to lower risk because:

(Multiple Choice)

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Question 104

An investment pays $1,000 three quarters of the time, and $0 the remaining time. Its expected value and variance respectively are:

(Multiple Choice)

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Question 105

High oil prices tend to harm the auto industry and benefit oil companies; therefore, high oil prices are an example of:

(Multiple Choice)

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Question 106

An investment pays $1,200 a quarter of the time; $1,000 half of the time; and $800 a quarter of the time. Its expected value and variance respectively are:

(Multiple Choice)

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Question 107

An investor puts $2,000 into an investment that will pay $2,500 one-fourth of the time; $2,000 one-half of the time, and $1,750 the rest of the time. What is the investor's expected return?

(Multiple Choice)

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Question 108

Showing 101 - 108 of 108

Considering leverage, can you explain why a mortgage lender would want borrowers to have larger down payments, and when the borrower doesn't the mortgage lender may require mortgage insurance?

Uncertainties that are not quantifiable:

What is the probability of tossing a pair of dice once and getting a 1? How about a 7?

Sometimes spreading has an advantage over hedging to lower risk because:

An investment pays $1,000 three quarters of the time, and $0 the remaining time. Its expected value and variance respectively are:

High oil prices tend to harm the auto industry and benefit oil companies; therefore, high oil prices are an example of:

An investment pays $1,200 a quarter of the time; $1,000 half of the time; and $800 a quarter of the time. Its expected value and variance respectively are:

An investor puts $2,000 into an investment that will pay $2,500 one-fourth of the time; $2,000 one-half of the time, and $1,750 the rest of the time. What is the investor's expected return?

An Introduction to Money and the Financial System

Money and the Payments System

Financial Instruments, Financial Markets, and Financial Institutions

Future Value, Present Value and Interest Rates

Bonds, Bond Prices, and the Determination of Interest Rates

The Risk and Term Structure of Interest Rates

Stocks, Stock Markets and Market Efficiency

Derivatives: Futures, Options, and Swaps

Foreign Exchange

The Economics of Financial Intermediation

Depository Institutions: Banks and Bank Management

Financial Industry Structure

Regulating the Financial System

Central Banks in the World Today

The Structure of Central Banks: The Federal Reserve and the European Central Bank

The Central Bank Balance Sheet and the Money Supply Process

Monetary Policy: Stabilizing the Domestic Economy

Exchange Rate Policy and the Central Bank

Money Growth, Money Demand and Modern Monetary Policy

Output, Inflation, and Monetary Policy

Understanding Business Cycle Fluctuations

Modern Monetary Policy and the Challenges Facing Central Bankers

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