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Define and discuss the portfolio-balance effect in terms of Quantitative Easing and its impact on bond and stock
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- Investors typically buy and sell stocks, bonds and other securities in the secondary market. Describe the different types of security markets and why they are so different.What is the best explanation of liquidity premium? What is suggested by an upward sloping yield according to segmented market theory? Explain: Show graphically the effect of a rise in expected inflation on interest rates in the bond market.
- The National Pension Fund pays no taxes on its capital gains or on its dividend and interest income. Would it be illogical for it to have low-dividend, high growth stocks in its portfolio? Would it be illogical to have government bonds (which are safe but offer a low interest) in its portfolio?prove that bond yields and bond prices are inversely related?What did the McKinnon and Shaw predict about the movements of interest rates once financial markets are no longer repressed? Explain why
- Suppose the interest rate rises. Using both the supply and demand for bonds and the liquidity preference frameworks, discuss whether this event is likely to reflect good economic news or is a sign of troubleSuppose everyone expects investment to rise sharply in three months. How would this expectation be likely to affect bond prices?Trace the impact of a sale of government bonds by the Central bank on bond prices, interest rates, investment, aggregate demand, real GDP, and the price level.
- Show graphically the effect of a sudden increase in the volatility of gold prices on interest rates in the bond market.The Minsky Model of a Financial Crisis . Economist Hyman Minsky believed “…the financial system in a market economy is unstable, fragile, and prone to crisis.” Explain in some detail how the financial system is “unstable, fragile and prone to crisis,” according to Minsky What did the psychological term euphoria mean to Hyman Minsky? In other words, define the term as Minsky would define it Briefly specify (but do not explain) the primary case against the market system of economic organizationQuestion 1 Briefly explain how the adverse selection problem can affect the financial markets. Explain how financial intermediaries can help to solve the adverse selection problem in stock and bond investments