261. The rescue of insolvent banks inevitably raises problems of:
Correct answer: (D)
Moral hazard
262. The returns on the following 3-month instruments are quoted in the usual way (i.e. some as discount rates, some as interest yields). Which instrument offers the best rate of return?
Correct answer: (B)
4.56% on commercial paper
263. The risk free rate of interest is 5% while the whole market return is 16%. According to the CAPM, the rate of return required on an asset with a β-coefficient of 1.1 is:
Correct answer: (A)
17.1%
264. The risk free rate of interest is 6% while the market risk premium is 10%. A share which is twice as risky as the whole market portfolio should produce a return of:
Correct answer: (A)
26%
265. The simple Phillips curve was attacked as suffering from:
Correct answer: (A)
Money illusion
266. The Swedish banking system is dominated by:
Correct answer: (A)
Universal banks
267. The target inflation rate in the UK is set by:
Correct answer: (B)
The government
268. The yields on government bonds are usually less than yields on corporate bonds of similar maturity because:
Correct answer: (B)
Government bonds are less risky than corporate bonds
269. Two assets have variances of 24 (asset A) and 45 (asset B). The covariance between them is 15. If a portfolio is composed of the two assets in the proportions 70% in A and 30% in B the portfolio standard deviation will be:
Correct answer: (A)
4.7
270. Two assets have variances of 24 (asset A) and 45 (asset B). The covariance between them is 15. The correlation coefficient of returns is:
Correct answer: (B)
0.46