Long-Term Debt Issued by Either the Government or a Corporation

question 69

Multiple Choice

Long-term debt issued by either the government or a corporation that pays fixed payments based on a preset schedule is referred to as:

• A) derivative assets.
• B) money market securities.
• C) equities.
• D) fixed-income securities.
• E) prime loans.

---

Definitions:

Secure Neighborhood

An area with low crime rates and effective safety measures, making it a desirable place to live.

Adverse Selection

Adverse selection is a situation in economics where one party in a transaction has more information than the other, often leading to an imbalance and unfavorable outcomes for one side.

Screening

A solution to the problem of adverse selection that describes the efforts of a less informed party to gather information about the more informed party. A successful screen means that it is unprofitable for bad types to mimic the behavior of good types. Any successful screen can also be used as a signal.

Signaling

A solution to the problem of adverse selection that describes an informed party’s effort to communicate her type, risk, or value to less informed parties by her actions. A successful signal is one that bad types won’t mimic. Any successful signal can also be used as a screen.