Lesson #5 Quiz :Financial Markets (Financial Markets) answer 2025

Question 1

While discussing what the future of financial markets will look like, which arguments were mentioned? (Select 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.
❌ It is hard to predict the nature of future financial markets, since human species is the product of a complex evolution.
❌ Financial markets will evolve following simple ideas and ideals, such as the ones historically mentioned by Karl Marx or Robert Owen.
❌ Financial markets are likely to stay the way they are now for the next three decades.

Explanation:
The discussion emphasized uncertainty and generational influence. It rejected deterministic or static views of financial market evolution.

Question 2

David Moss compares investors’ psychology under unlimited liability with lottery tickets as:

❌ Symmetrical depending on the amount of money involved.
❌ There is no such comparison.
✅ Asymmetrical. Unlimited liability investors overestimate the minimum probability of loss, while lottery investors overestimate the minimum probability of win.
❌ Symmetrical. Both overestimate the minimum probability of loss.

Explanation:
Investors behave differently depending on loss exposure vs. upside temptation, leading to opposite probability misperceptions.

Question 3

The introduction of inflation-indexed debt was motivated by: (Select 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.

Explanation:
Inflation-indexed debt protects both lenders and borrowers by preserving real value and avoiding inflation-driven wealth transfers.

Question 4

Why did Chile introduce the Unidad de Fomento?

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

Explanation:
The Unidad de Fomento was created to stabilize contracts in real terms during periods of high inflation.

Question 5

The concept of equity-protected mortgages consists in:

❌ Mortgages that include accident insurance.
❌ Mortgages that include casualty insurance.
✅ Mortgages that include house price insurance.
❌ Mortgages that include fire insurance.

Explanation:
Equity-protected mortgages insure homeowners against declines in house prices, protecting their home equity.

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