MACROECON-EBK+MYECONLAB CDE+STUDENT PKT
7th Edition
ISBN: 9780135623060
Author: HUBBARD/TIERNE
Publisher: PEARSON C
expand_more
expand_more
format_list_bulleted
Question
Chapter 6, Problem 6.2.9PA
To determine
The reason for not selling the rating services directly to the investors.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Why do you think that U.S. banks are prohibited from holding equity as part of their own portfolios? Is this a good thing or a bad?
Many politicians are seeking to eliminate the Dodd-Frank Act, while others seek to strengthen it. On which side are you, and why?
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.
which of the following statement is true? interest rates on municipal bonds are on average
higher than those of the U.S. government bonds with the same terms to maturity because municipal bonds are not as risky as the US government bonds.
lower than those of the US government bonds with the same terms to maturity because municipal bonds are not as risky as the US government bonds
lower than those of the US government bonds with the same terms to maturity because municipal bonds are not as liquid as the US government bonds.
higer than those of the US government bonds with the same terms to maturity because municipal bonds are not as liquid as the US government bonds.
lower than those of the US government bonds with the same terms to maturity because many local business prefers municipal bonds
Chapter 6 Solutions
MACROECON-EBK+MYECONLAB CDE+STUDENT PKT
Ch. 6.A - Prob. 1RQCh. 6.A - Prob. 2RQCh. 6.A - Prob. 3RQCh. 6.A - Prob. 4RQCh. 6.A - Prob. 5RQCh. 6.A - Prob. 6PACh. 6.A - Prob. 7PACh. 6.A - Prob. 8PACh. 6.A - Prob. 9PACh. 6.A - Prob. 10PA
Ch. 6.A - Prob. 11PACh. 6.A - Prob. 12PACh. 6.A - Prob. 13PACh. 6.A - Prob. 14PACh. 6 - Prob. 6.1.1RQCh. 6 - Prob. 6.1.2RQCh. 6 - Prob. 6.1.3RQCh. 6 - Prob. 6.1.4PACh. 6 - Prob. 6.1.5PACh. 6 - Prob. 6.1.6PACh. 6 - Prob. 6.1.7PACh. 6 - Prob. 6.1.8PACh. 6 - Prob. 6.1.9PACh. 6 - Prob. 6.1.10PACh. 6 - Prob. 6.1.11PACh. 6 - Prob. 6.1.12PACh. 6 - Prob. 6.2.1RQCh. 6 - Prob. 6.2.2RQCh. 6 - Prob. 6.2.3RQCh. 6 - Prob. 6.2.4PACh. 6 - Prob. 6.2.5PACh. 6 - Prob. 6.2.6PACh. 6 - Prob. 6.2.7PACh. 6 - Prob. 6.2.8PACh. 6 - Prob. 6.2.9PACh. 6 - Prob. 6.2.10PACh. 6 - Prob. 6.2.11PACh. 6 - Prob. 6.2.12PACh. 6 - Prob. 6.2.13PACh. 6 - Prob. 6.3.1RQCh. 6 - Prob. 6.3.2RQCh. 6 - Prob. 6.3.3RQCh. 6 - Prob. 6.3.4RQCh. 6 - Prob. 6.3.5PACh. 6 - Prob. 6.3.6PACh. 6 - Prob. 6.3.7PACh. 6 - Prob. 6.3.8PACh. 6 - Prob. 6.3.9PACh. 6 - Prob. 6.4.1RQCh. 6 - Prob. 6.4.2RQCh. 6 - Prob. 6.4.3PACh. 6 - Prob. 6.4.4PACh. 6 - Prob. 6.4.5PACh. 6 - Prob. 6.4.6PACh. 6 - Prob. 6.2CTE
Knowledge Booster
Similar questions
- Please, I need help with number 1, 2, 3, 4 1. Assume that there are two assets in the world, stocks and bonds. If both sell at the same price, and if stocks are twice as risky as bonds, we should expect that the a. Stocks will not sell. b. Rate of return on stocks will be twice the rate of return on bonds c. Rate of return on bonds will be twice the rate of return on stocks d. Rate of return on bonds will be higher than stocks, by an indeterminate amount 2. Which of the following describes the relationship between stock and bond prices and interest rates? a. There is a direct and positive relationship between the rate of interest and stock and bond prices. (As interest go up, stock and bond prices rise as well.) b. The relationship is far too difficult to quantify. c. There is an inverse relationship between interest rates and the price of a stock or a bond. (As interest rates go up, stock and bond prices decline.) d. It varies with the performance of the stock or bond market. 3.…arrow_forwardStock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market. What only about 30 percent of surveyed investors knew was that as bond prices rise, interest rates a. fall in reaction to the decreased demand for bonds. b. rise in reaction to the increased demand for bonds. c. fall in reaction to the increased demand for bonds. d. rise in reaction to the decreased demand for bonds.arrow_forwardThe 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?arrow_forward
- Why are financial intermediaries the most heavily regulated businesses in the economy? Explain why stock market is an important factor in business investment decisions? What is inflation? What explains inflation? If there is a recession, will it be more difficult to find a job when you graduate? Explain. What are the six types of regulations the government employs in an attempt to ensure the soundness of our financial intermediaries? Explain. Explain the difference between debt and equity markets. primary and secondary markets, exchange and over the counter markets and money and capital markets. What is the difference between foreign bond and a Eurobond? Which institutions are subject to Federal Deposit Insurance corporation (FDIC) regulations, and what is the nature of the regulations? What are the reasons for high transaction costs to exist in a barter economy? What separates the assets included in M1 from the assets included in M2? Does it matter what definition of money policy…arrow_forwardQ1: Define and differentiate between: a) Organized exchanges and Over the counter markets b) Open Ended vs Closed Ended Mutual Funds c) Moral Hazard and Adverse selection Q2: What is meant by asset transformation and how is it the basis for differentiating between indirect finance and direct finance? Q3: What are the three main reasons for regulating financial markets and institutions? Also list the major regulation examples under each of the three reasons. Q4: What value do mutual funds add for individual investors and how? Q5: Using the relevant financial securities and institutions, explain the chain of events which lead to the 2007 global financial crisis. Q6: Last year Fauji Fertilizer Company Limited (FFCL) gave an annual dividend per share of Rs. 8.85 which is expected to grow at 5%, forever. Calculate the per share price of the stock if its required rate of return is 14%? Q7: Calculate the duration of a 7-year coupon bond having a 11% coupon rate. The current market…arrow_forwardQuestion 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 investmentsarrow_forward
- Explain why you agree or disagree with the following statements:A. “A bond issued by a corporation of the highest credit rating can qualify as a risk-free asset.”B. “A five-year U.S. Treasury note would qualify as a risk-free asset because of its guarantee by the U.S. government.”arrow_forwardAn economist has estimated that, near the point of equilibrium, the demand curve and supply curve for 1 year bonds can be estimated using the following equations:Demand: Price = (-0.5)*Quantity + 930Supply: Price = Quantity + 500Assume the face of the bond is $1,000.1. What is the expected equilibrium price and quantity of bonds in this market to 4 decimal places? Price$ Quantity 2. Given your answer to part (a), which isarrow_forwardDiscuss the Contribution of Stephen Ross(1976) to the theory of Financial Economics and identify the risk factors (in his model) which are applicable in our economyarrow_forward
- The bank wants to sell more shares of stock, keep more of its earnings, buy more Treasury securities, and give fewer business loans. Regulators have always given it a good rating, but this financial institution thinks that by using these strategies, regulators will give it an even better rating. Explain in detail why you think the plans of the financial institution will make both regulators and shareholders happy.arrow_forwardWhat does the risk structure of interest rates measure? Is the current structure of U.S. rates consistent with your impressions of the health of the U.S economy and the corporate and housing sectors? Give specific examples.arrow_forwardWhich of the following statements is false? 1 ）Because the cash flows promised by the bond are the most that bondholders can hope to receive, the cash flows that a purchaser of a bond with credit risk expects to receive may be less than that amount. 2) By consulting bond ratings, investors can assess the creditworthiness of a particular bond issue. 3.Because the yield to maturity for a bond is calculated using the promised cashflows, the yield of bonds with credit risk will be lower than that of otherwise identical default-free bonds. 4) A higher yield to maturity does not necessarily imply that a bond's expected return is higher. 5) none of the answers are correctarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Microeconomics: Principles & PolicyEconomicsISBN:9781337794992Author:William J. Baumol, Alan S. Blinder, John L. SolowPublisher:Cengage Learning
Microeconomics: Principles & Policy
Economics
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:Cengage Learning