fin402 Financial Institutions and Markets
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Q1. “The more risk-averse people are, the more likely they are to diversify.” Is this statement true, false, or uncertain? Explain your answer.
Q2. Define the concept of Standard Deviation and how to help to evaluate different investment choices?
Q3. Explain the relation between Interest rate and Bonds quantity level?
Q4. Do credit rating agencies do a good job at assessing credit risk?
Q5. Emphasise fundamentals of financial institutions within financial markets? Outline the role of financial intermediates and how important to financial systems?
Q6. Why do financial markets exist? How would the economy function without them? What are the potential disadvantages of financial intermediaries? Discuss
Answer preview
It is true. Risk-averse investors prefer the safety of their money over high returns. It implies that they choose to preserve their capital and choose certain investments to avoid losses when the market collapses(Casaló & Flavián, 2015). They prefer conservative investment where their investments increase in value gradually and slowly over time. With the constant increase in investment and value for their capital, risk-averse people can diversify and increase their investment while reducing the chances of potential risks from losses.
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