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H5.
The bank have an incentive to value the new securities at a higher price because they will gain more. Is that a good or bad strategy? Explain why
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- All else being equal, if a central bank buys government bonds from the market it would: a. mean savings in the economy are likely to increase. b. mean the supply of loanable funds would move to the left. c. increase the money supply. d. increase interest rates.All else being equal, if a central bank sells government bonds from the market it would: a. decrease the money supply. b. decrease interest rates. c. mean the supply of loanable funds would move to the right. d. most likely decrease savings in the economy.1) What id the essential purpose for financial markets? 2) Which is more important, the primary market for stocks of the secondary market? Why? 3) How does a ponzi scheme work? 4) Discuss some of the forces that help make markets efficient? 5) What are institutional investors? Why are they needed in our economy? 6) What are some of the differences between a forward contract and a future contract?
- Suppose that the Fed wants to lower long-term interest rates and buys all the Treasury securities banks hold. Reflect those changes on the balance sheet (commitment to low long term interest rate environment, QE)Which of the following will have the same effect on money supply as raising the reserve requirement? a) The central bank decreases the interest rate. b) The central bank purchases bonds in the market. c) The central bank purchases securities and debentures in the market. d) Lower bond prices.if we see an increase in default rates, what may that mean for the junk bond market and for companies that want/need to sell more junk bonds?
- 1. At any given time, the bank will purchase foreign exchange currency at what cost? a. market price b. client's selling price c. lower than the selling price 2. A bond call price amount is a. lower than par value b. higher than par value c. lower than discount valueIf a bank manager wants to protect the bank against losses that would be incurred on its portfolio of Treasury securities should interest rates rise, he could financial futures. A. sell put B. sell call C. buy put D.buy callWhich of the following is a constrain for the investors? a. The mentality tontake the high risk b. Tax exemption on security trading c. Getting high income d. Liquidity needs
- The central bank takes action that lowers interest rates dramatically. what is the effect of it to firm value? increase or decrease and why.First National Bank has assets that are more rate-sensitive than its liabilities. As interest rates rise, then we should expect the bank profits to: A. Rise B. Fall C. Remain unchangedThe RBA decides to buy bonds and securities from commercial banks on the open market. Other things being equal, this will result in a(n) _________ in the price of financial assets. short term increase, but longer-term fall increase decrease short term decrease, but longer-term rise no change
