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1- Event risk is the possibility that a. A borrower will face some circumstance that will prevent the borrower from paying the loan back b.
1- Event risk is the possibility that
a. A borrower will face some circumstance that will prevent the borrower from paying the loan back
b. A major catastrophic occurrence, such as a hurricane, flood, or terrorist attack, will lower the return of the investment
c. The overall price level will rise faster than expected, so that the lender is repaid in dollars that are worth less than the lender expected
d. The lender will go bankrupt before the loan is fully repaid
2- Which of the following is the best definition of a stock index?
a. A measure of the price of a group of stocks, such as the Dow Jones Industrial Average or the S&P 500
b. A mutual fund made up of a group of stocks and sold through a firm such as Vanguard or Fidelity
c. A category of stocks whose value is indexed to the inflation rate to safeguard the investor against inflation risk.
d. A control the Federal Reserve places on the stock market via margin requirements, whereby the Fed indexes margin requirements to inflation
3- True or False: If the demand for loans increases, the interest rate will fall
