Asset Demand and Supply under Uncertainty MCQs

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Default risk represents the likelihood that a borrower will evade his or her financial obligations with respect to interest, principal, or both.




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If an financial instrument is easily convertible, then liquidity risk increase.




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The possibility of future change in price with a consequent of loss of return results in






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Risk that is caused by a factor or factors common to all or most assets in the financial system is called






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Price fluctuations that result from external factors arising out of political, legal, or aggregate domestic or international changes in economic condi...






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When the exchange rate fluctuates in an unanticipated direction or to an unanticipated degree this results in






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Any change in the stream of income or profits will influence the ability to pay the interest and principal on a loan. The possibility of unexpected fl...






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An underestimate of future inflation benefits the borrower while penalizing the lender. The converse is also true. Consequently, investors face:






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Tax Risk. Changes in the tax treatment of interest income, registered retirement saving plans and capital gains will result in






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Bonds that are indexed to inflation are not subject to inflation risk.




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Bond rating schemes such as Dominion Bond Rating and Canadian Bond Rating, are used to evaluate the degree of __________ risk of the bond issuer.






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The weighted average of the squared deviations of asset prices is defined as the






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The weighted average of returns anticipated over time is defined as the






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The square root of the variance of returns is defined as the






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Consider the following information for the financial asset A. State of the World State 1 State 2 State 3 Probability of occurrence 0.10 0.50 0.40 ...






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A portfolio is composed of three assets, A, B, and C for which the following features apply: .tg {border-collapse:collapse;border-spacing:0;} .tg...






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A portfolio is composed of three assets, A, B, and C for which the following features apply: .tg {border-collapse:collapse;border-spacing:0;} .tg...






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A portfolio is composed of three assets, A, B, and C for which the following features apply: .tg {border-collapse:collapse;border-spacing:0;} .tg...






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A portfolio is composed of three assets, A, B, and C for which the following features apply: .tg {border-collapse:collapse;border-spacing:0;} .tg...






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A portfolio is composed of three assets, A, B, and C for which the following features apply: .tg {border-collapse:collapse;border-spacing:0;} .tg...






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A portfolio is composed of three assets, A, B, and C for which the following features apply: .tg {border-collapse:collapse;border-spacing:0;} .tg...






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A portfolio is composed of three assets, A, B, and C for which the following features apply: .tg {border-collapse:collapse;border-spacing:0;} .tg...






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What is the covariance of returns between asset A and Asset C?






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A portfolio is composed of three assets, A, B, and C for which the following features apply: .tg {border-collapse:collapse;border-spacing:0;} .tg...






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If the correlation between two assets, A and B for instance is said to equal -0.65, this means that