5. What are the six core functions performed by the financial system? (6 pts.) 6. Malcolm just purchased theft insurance for his business Since he has the peace of mind of knowing that any business losses from theft will be covered, he does not install a surveillance camera or alarm system on the premises of his business. The incentive problem illustrated by this example is a. Adverse selection b. Principal-agent problem e. Moral hazard d. Collateralization 7. Interest rates on bonds depend on all of the following except: a. The currency or commodity in which payments on the instrument are denominated b. The time at which the bond matures c. The possibility that some part of the principal or interest on the bond may not be repaid d. The ease with which the bond can be readily converted to cash 8. Circle the correct answer from the answer choices given When it comes to determining rates of retum in a market economy such as the United States, the greater the degree of risk aversion of the population, the higher lower the risk premium required, and the higher lower the risk-free rate of interest. (2 pts.) 9. A city government looking to raise funds for a public works project by means of underwriting and issuing municipal bonds would most likely turn to an): a. Mutual Fund b. Investment Bank c. Brokerage d. Commercial Bank 10. is the general term for financial instruments whose value depends on the price of one or more other assets. a. Bonds b. Derivatives c. Options d. Futures contracts