When frequency, asset specificity and uncertainty rise, what happens to the cost of using the market?

Q: As supplier of funds, households invest by purchasing cars or houses. Is it true or false?

A: Individuals or firms who save or make investments in the financial market are the suppliers of funds…

Q: Risk premiums on corporate bonds are usually anticyclical; that is, they decrease during business…

A: Risk-premium is the term used to define an additional gain from the investment to reduce the risk…

Q: Investment projects can be viewed as analogous to bank loans. True or false?

A: An investment project is a proposal that includes information on the expenditure of the planned…

Q: Which of the following is true for limit orders?   a. They face adverse selection risk from noise…

A: In a market limit orders refers to the situation when brokers ar wallowed to exchange stocks and…

Q: What role does executive compensation play in risk-taking and accountability? Why do some people…

A: Executive compensation plays the important role of attracting talents who shoulder most of the…

Q: When multinational corporations are trying to hedge exposures, which of the options is better:…

A: A Hedge is referred to as an investment which is made with an intention of reducing the adverse…

Q: How does derived demand create volatiledemand?

A: As economies emerged, goods and services were produced that required machinery and labour.  For…

Q: Would usury laws help or hinder resolution of a shortage in financial markets?

A: Usury law is implemented by the government pertaining to interest on the loans taken by the…

Q: What happens when the "Tax Ratio" of the commercial banks in the positive figure?

A: The Tax Ratio is the most strong indicator of a person's tax efficiency. The tax ratio is the…

Q: What are some pros and cons of investor policy?

A: Owning an asset for getting returns in the future by an individual is known as investment. These…

Q: The cost of money is established and measured by an interest rate. True or false?

A: Answer - Cost of Money -  Cost of the money is amount of interest can be charged on the money…

Q: Why are companies' liquidity ratios calculated?

A: Definition of Liquidity Ratio- A liquidity ratio is a type of financial ratio used to determine the…

Q: is how much of a product or service people are willing to buy at a specific price. Your answer…

A: Answer: (1). Quantity demanded is how much of a product or service people are willing to buy at a…

Q: does increased correlations between two currencies affects a company's exposure? why?

A: Exchange rate:- An exchange rate determines the price where the currency would be exchanged for the…

Q: An agent (a financial institution or individual financial investor) that has agreed to deliver a…

A: Answer: An investor or agent who has agreed to deliver a specific asset (but not yet own them) to…

Q: In the financial market, if the quantity of funds demanded is greater than the quantity of funds…

A: When the demand for funds increases and the supply of funds is not full fill that demand the…

Q: How can an inaccurate estimate of assets have serious consequences?

A: Answer - Estimates of assets - It is approximate value of assets of original value of assets which…

Q: Which type of derivative reduces risk the most? Group of answer choices A. An options contact. B.…

A: Derivatives refers to the financial transaction between two parties on the basis of set value of a…

Q: How do information asymmetries affect financing decisions?

A: Answer - Asymmetric Information - This is th situation where one individual, firm or even country…

Q: The demanders of funds participate in the financial market to earn profit. * True or False??

A: Individuals and businesses who save money and make financial investments are the suppliers of funds…

Q: Name and explain 2 differences between using oil futures to fix the price of future purchases. Graph…

A: Oil trading is the purchasing and selling of various kinds of oil and oil-connected resources to…

Q: The concept of market efficiency applies only in the financial market.  True or False?

A: Market efficiency is the economic concept to describe the functioning of the market and its ability…

Q: Why is there a need for companies like Standard and Poor’s and Moody’s to provide ratings (i.e. AAA,…

A: Adverse selection: - Adverse selection is a problem that arises because of the difference in the…

Q: Can Reckitt extend its position in emerging markets. If so, how can this be achieved?

A: Developing economies will likely play an outsized role within the growth of consumer products…

Q: Explain briefly what is it:  Repurchase Agreements (REPO) Open Market Operations (OMO)

A: Financial instruments: These are monetary contracts between two parties.

Q: The discount rate will never be equal to interest rate. True or False?

A: Discount rate is defined as the rate of interest which is charged to commercial banks and other…

Q: Which of the statements about subprime lending is false? Before the 2008 financial crisis,…

A: Subprime lending refers to lending to borrowers with low credit ratings. Due to high risk factor,…

Q: Under what circumstances money may appear as non- neutrality?

A: Money is neutral when its effect is zero on the economy. when the change is occurring in the money…

Q: True or false When financial intermediaries deleverage, firms cannot fund investment opportunities…

A: An individual or an institution which behaves as a middleman among parties for facilitating…

Q: What are the empirical evidences in favor of and against the efficient market hypothesis?

A: The EMH often known as the efficient market theory, asserts that stock prices reflect all available…

Q: What benefit do people get from the market forinsurance? What two problems impede the…

A: Future is uncertain and people dislike uncertainty that is the adverse risk. A rational response to…

Q: Reasons money appear as non-neutrality? Explain.

A: Neutrality of money explains about the concept that money is considered to be a neutral factor in…

Q: Is FedEx’s level of emphasis on quality appropriate? Why or why not?

A: The act of overseeing all of the tasks and activities which are required for the maintenance of the…

Q: A wide bid-ask spread implies: an illiquid market the way the CBOE works Oa liquid market O the…

A: An illiquid market is a market where assets are not liquid and hence there is a difficulty in their…

Q: Under what circumstances money may appear as non-neutrality??? Can you explain to me?

A: In an economy, money plays a significant role in influence the market factors, but it might affect…

Q: Define the term Risk-Free-Interest Rate?

A: A risk-free interest rate is a rate of return on investment with the least risk or no risk. Since…

Q: A producer holding a commodity is said to be _______________ and could hedge by going __________ a…

A: A commodity is a fundamental decent utilized in business that is compatible with different products…

Risk and Uncertainty

Uncertainty refers to a situation when there is one possible outcome of a decision but where the probability of occurrence of each particular outcome is not known or cannot be estimated.