1. Among the reasons cited for why Black Rock is pursuing a revival of the single-name credit default swap market include:
a. many years of low interest rates that have kept returns to investors low.
b. the lack of precision that characterize index CDS instruments.
c. the desire to create a more stable market given that there are other risky competitive derivatives available in the market.
d. All of the above.
e. None of the above.
2. As explained in the Kellogg study, AIG’s involvement in securities lending was risky because:
a. these securities were lent out to companies with a high degree of risk.
b. they used income from this on high yield, and high risk, assets.
c. they lent out their most safe mortgage-backed securities.
d. those borrowing the securities would often not return them to AIG.
e. All of the above.
3. Finance can said to suffer from the problem of:
a. adverse selection, but not moral hazard.
b. moral hazard, but not adverse selection.
c. neither adverse selection nor moral hazard.
d. both adverse selection and moral hazard.
4. Since 1980, the ratio of financial assets to GDP in the U.S. has been:
a. above 300%.
b. above 200%.
c. above 150%.
d. below 250%.
e. below 100%.
5. As a general rule one can say that as risk rises:
a. returns fall and liquidity falls.
b. returns fall and liquidity rises.
c. returns rise and liquidity rises.
d. returns rise and liquidity falls.
e. neither returns nor liquidity changes.
6 According to the authors of the text, the Glass-Steagall Act:
a. hurt the financial system but not the U.S. economy.
b. hurt both the financial system and the U.S. economy.
c. hurt neither the financial system nor the U.S. economy.
d. hurt the U.S. economy but not the financial system.
e. helped the financial system but hurt the U.S. economy.