Coursera | Financial Markets

Lesson #5 Quiz >> Financial Markets

Lesson #5 Quiz >> Financial Markets

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1. While discussing what the future of financial markets will look like, the following arguments were mentioned (check all that apply):

  • It is hard to predict the nature of future financial markets, this evolution will depend on the involvement of young generations within the financial community.
  • Financial markets will evolve following simple ideas and ideals, such as the ones historically mentioned by Karl Marx or Robert Owen.
  • It is hard to predict the nature of future financial markets, since human species is the product of a complex evolution.
  • Financial markets are likely to stay the way they are now for the next three decades.

2. In his work, David Moss describes how investors’ psychology favored limited liability after the early 19th century New York experiment. In fact, the comparison between investors’ psychologies in the context of unlimited liability and lottery tickets is:

  • Symmetrical. Unlimited liability and lottery tickets investors tend to overestimate the minimum probability of loss.
  • Asymmetrical. Unlimited liability investors tend to overestimate the minimum probability of loss, whereas in lottery tickets, they overestimate the minimum probability of win.
  • Symmetrical depending on the amount of money involved. For large amounts, both unlimited liability and lottery tickets investors tend to overestimate the minimum probability of loss.
  • There is no such comparison between lottery tickets and unlimited liability investors.

3. The introduction of inflation indexed debt was motivated by: (check all that apply)

  • An incentive to hedge from inflation volatility.
  • The idea to generate profits when inflation is equal to 0.
  • Historical examples of nominal debt being wiped out in real terms by high inflation.
  • An incentive to have a debt contract fixed in real terms.

4. Why did Chile introduce the Unidad de Fomento ?

  • To provide stimulus to the economy.
  • To create a unit of account indexed to inflation, in order to counteract the impact of hyperinflation.
  • To bolster international trade.
  • To replace the peso as the official currency because of hyperinflation.

5. The concept of equity-protected mortgages consists in:

  • Mortgages that include fire insurance.
  • Mortgages that include casualty insurance.
  • Mortgages that include house price insurance.
  • Mortgages that include accident insurance.

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