We study the frequency of prime rate changes. We model the prime rate as a time-series variable that can be changed only at some cost. This yields a logit model in which the probability of a prime rate change is a function of market variables. We test this model using data from a micro data set that gives the dating of prime rate changes. The results indicate that adjustment costs are important to the prime rate adjustment process, and that changes in exogenous variables have a significantly larger effect on the probability of a prime rate increase than decrease.

The data base compiled during the norming of the Third Edition of the Test of Understanding College Economics (TUCE III) (Saunders, 1994) contains information from 40 instructors of introductory microeconomics courses at 26 different schools who used the posttest score to determine some part of their students' course grade. Of these students, 1,896 answered 30 questions on micro TUCE III both at the beginning (pretest) and the end (posttest) of their one-term course. This paper will use a comparison of the preand posttest responses to each alternative on each question by each student to analyze patterns of persistence and change in choosing correct and incorrect responses.' For each student on each question, there are five possible response patterns:

Part 1 Introduction: the financial services industry - depository institutions the financial services industry - insurance companies the financial service industry - securities firms and investment banks the financial services industry - mutual funds the financial services industry - finance companies why are financial intermediaries special risks of financial mediation. Part 2 Measuring risk: interest rate risk I interest rate risk II market risk credit risk - individual loan risk credit risk - loan portfolio and concentration risk foreign exchange risk sovereign risk liquidity risk. Part 3 Managing risk: liability and liquidity management deposit insurance and other liability guarantees capital adequacy product diversification geographic diversification - domestic geographic diversification - international futures and forwards options, caps, floors, and collars swaps, loan sales and other credit management techniques securitization.