The existence of counterparty risk
A) has no effect on the contracting parties.
B) is disallowed under current government regulations.
C) results in information costs for buyers and sellers when analyzing the potential creditworthiness of potential trading partners.
D) reduces the risk introduced by forward contracts.
C
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Which of the following describes how a negative externality affects a competitive market?
A) The externality causes a difference between the private cost of production and the private benefit from consumption. B) The externality causes consumer surplus to exceed producer surplus. C) The externality causes a difference between the private cost of production and the equilibrium price. D) The externality causes a difference between the private cost of production and the social cost.
Monetarists argue that an exogenous fall in investment spending leads to
A) declining real output. B) declining money supply. C) declining velocity. D) declining interest rates.