Questions from Financial Markets

Q: Will there be an effect on interest rates if brokerage commissions on

Will there be an effect on interest rates if brokerage commissions on stocks fall? Explain your answer.

Q: Predict what will happen to interest rates if the public suddenly expects

Predict what will happen to interest rates if the public suddenly expects a large increase in stock prices.

Q: Predict what will happen to interest rates if prices in the bond

Predict what will happen to interest rates if prices in the bond market become more volatile.

Q: How does a decline in the value of the pound sterling affect

How does a decline in the value of the pound sterling affect British consumers?

Q: Explain why you would be more or less willing to buy a

Explain why you would be more or less willing to buy a house under the following circumstances: a. You just inherited $100,000. b. Real estate commissions fall from 6% of the sales price to 4% of the...

Q: Using the information from the previous question, assume that investors prefer

Using the information from the previous question, assume that investors prefer holding short-term bonds. A liquidity premium of 10 basis points is required for each year of a bond’s maturity. What wil...

Q: Little Monsters, Inc., borrowed $1,000,000

Little Monsters, Inc., borrowed $1,000,000 for two years from NorthernBank, Inc., at an 11.5% interest rate. The current risk-free rate is 2%, and Little Monsters’ financial condition warrants a defau...

Q: At your favorite bond store, Bonds-R-Us,

At your favorite bond store, Bonds-R-Us, you see the following prices: a. 1-year $100 zero selling for $90.19 b. 3-year 10% coupon $1000 par bond selling for $1000 c. 2-year 10% coupon $1000 par bond...

Q: You observe the following market interest rates, for both borrowing and

You observe the following market interest rates, for both borrowing and lending: one-year rate…………………………………………. 5% two-year rate………………………………………… 6% one-year rate one year from now………… 7.25% How c...

Q: Assuming that the expectations theory is the correct theory of the term

Assuming that the expectations theory is the correct theory of the term structure, calculate the interest rates in the term structure for maturities of one to five years, and plot the resulting yield...