Net Regulatory Burden for FIs Is Higher Because Regulators May

question 109

Multiple Choice

Net regulatory burden for FIs is higher because regulators may require the FI to

• A)hold more capital than what would be held without regulation.
• B)produce less information than would be produced without regulation.
• C)hold more debt than what would be held without regulation.
• D)hold fewer reserves than they would without regulation.

Understand and describe the concepts of adverse selection and moral hazard in insurance markets.

Explain the impact of private information on economic efficiency and the role of risk in economic decision-making.

Apply the concept of expected value to calculate health costs and insurance premiums.

Understand the behavior of risk-averse individuals and their strategies to manage risk.

---

Definitions:

Bond Rating

An evaluation made by credit rating agencies regarding the credit worthiness of a corporation's or government's debt issues, reflecting the likelihood of default.

Yield To Maturity

The total expected return on a bond if held to its maturity date, taking into account both interest payments and capital gains or losses.

Premium

The amount paid for an insurance policy or an additional amount above the nominal or face value of securities.

Par Value

The face value of a bond or stock as stated by the issuer, which does not necessarily reflect its market value.