The 1990-1992 Recession Was Unlikely to Be Associated with Financial

question 32

Multiple Choice

The 1990-1992 recession was unlikely to be associated with financial factors since

• A) there was little change in interest rates.
• B) consumption did not drop.
• C) interest spreads increased right from the start.
• D) interest rates for lending and borrowing went up.
• E) profits in the banking sector increased.

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Definitions:

Risk Arbitrage

Speculation on perceived security mispricing, often in connection with merger and acquisition targets.

One-Factor APT

A financial model that describes the relationship between a security's returns and a single factor affecting all securities, used to predict performance.

Risk-Free Rate

The theoretical rate of return on an investment with zero risk, typically represented by government bonds of a stable country.

Diversified Portfolios

A strategy that mixes a wide variety of investments within a portfolio to minimize risks.