Economics
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I. Describe each of the following financial instruments, in terms of maturity, risk, and liquidity. Identify a type of financial institution or other participant in the financial market (individuals, government, business) that are most likely to borrow using these instruments, and a type of institution or other participant that are most likely to lend using these instruments.
Negotiable CDs
Municipal Bonds
Residential Mortgages
Repurchase Agreements
(e) Bankers Acceptance
(f) Federal Funds
II. Describe each of the following financial intermediaries, in terms of its liabilities (what type of liabilities does it issue? who holds these liabilities?) and assets (what kinds of assets does it hold? who issued these assets?).
(a) Credit Unions
(b) Pension Funds
(c) Money Market Mutual Funds
(d) Finance Companies
III. Adverse selection and moral hazard
Are the examples below adverse selection or moral hazard? Explain.
(a) Those with a history of diseases are more likely to purchase health