Stock market bubbles are welfare enhancing since they relax financial constraints and allows constrained firms to invest in positive NPV projects which was otherwise not possible. Following this finding, a government intent on improving corporate welfare could inject liquidity in the firm finance market and this should boost investment spending for even the constrained firms. Bubbles are essentially liquidity in this framework. Select one: O True O False
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- Suppose that, holding yield constant, investors are indifferent as to whether they hold bonds issued by the federal govemment or bonds issued by state and local governments (that is, they consider the bonds the same with respect to default risk, information costs, and liquidity) Suppose that state governments have issued perpetuities (or consoles) with $78 coupons and that the federal govemment has also issued perpetuities with $78 coupons. If the state and federal perpetuites both have after-tax yields of 8%, what are their pre-tax yields? (Assume that the relevant federal income tax rate is 31.13%) * The pre-tax yield on the state perpetuity will be______________% * The pre-tax yield on the federal perpetuity will be_______________%Match the contribution with the appropriate scholar. Who believed that framing the general equilibrium of the entire microeconomy is better treated one market at a time? v Choose... Modigliani Who is considered the father of Modern Portfolio Theory? Marshall Fisher Who demonstrated why people are either savers or dissavers? Keynes Who provided a general existence proof of a competitive equilibrium? Markowitz Ricardo Who developed the distinction between comparative and absolute advantage? Arrow Hotelling Who first developed a working model of options pricing? Bachelier Smith Who argued that competition in physical space can result in minimum differentiation? Choose... Who determined that, unlike the neoclassical microeconomic theory of equilibrium, we may be in a state of persistent Choose... disequilibrium in the macroeconomy? Who considered the regard by others as an important driver of human behavior? Choose... Who developed a complete Life Cycle Model of spending and saving…Following the COVID-19 pandemic, central banks have committed to keepingshort-term interest rates low to stimulate economies and financial markets, evenas the recovery gains traction. Discuss the implications of this commitment by thecentral-bank on a Takaful Operator’s investment performance and providerecommendations on how it should restructure its asset classes so to continuemeeting expected returns?
- The demand ? (in billions of £) for a bond with coupon rate 5% and face value ?? = 1000, and two years to maturity as a function of its price ? is ? = 4000 − 2?. The supply in (billions of £)asafunctionofthepriceofthebondis ? = 2?+ 400. There is a business cycle expansion, so both supply and demand shifts. After the shift, the new demand curve is given by: ?=4000+?−2? ,whereas the new supply curve is ?=2? + 200. For which values of ? will the interest increase/decrease? Which values of ? are in line with empirical data?In the Loanable Funds Market Model, ceteris paribus, it typically follows that when the federal government runs a budget deficit, there will be préssure on interest rates and pressure on private investment. This is referred to as Select one: O a. upward; upward; crowding out Ob. upward; downward; crowding out O c. downward; downward; financial intermediation Od. downward; upward; financial intermediation.Which of the following statements is correct? O All of these answers are correct. O FDI stock is a total accumulation of inbound FDI in a country or outbound FDI from a country. FDI refers to directly investing in activities that control and manage value creation in other countries. OMNES are firms that engage in FDI.
- In Minsky's theory, all other things being equal, greater measures of leverage in investment result in, O a. Higher profits, with certainty O b. Lower profitability O c. Higher expected profitability and higher risksWith reference to the discounted cash flow model for determining stock prices, cafrefully explain how stock prices might be affected by the following policy changes: 1) an unexpected monetary expansion with no change in fiscal policy; 2) an anticipated monetary expansion with no change in fiscal policy; 3) a fiscal expansion with no change in monetary policy. 12pt v Paragraph v B A v To4. Tompton has estimated that near the point of equilibrium, the demand curve and sunnly oum for bonds can be estimated using the following equations: Bd: Price = -2 Quantity + 850 BS: Price = Quantity + 600 a. What is the expected equilibrium price and quantity of bonds in this market? b. Given your answer to part (a), which is the expected interest rate in this marketo
- Suppose earlier this morning, your broker recommended you buy Lee County, NC school construction bonds for your personal investment portfolio. Ceteris paribus, it follows that she thinks the market is currently and she expects Lee County bond prices to Lee County debt, in the future. Select one: a. over-pricing; increase b. over-pricing; decrease C. under-pricing; increase d. under-pricing; decreaseAccording to this theory of the term structure, bonds of different maturities are not substitutes for one another. Select one: O a. Segmented markets theory O b. Expectations theory O c. Liquidity premium theory O d. Separable markets theoryRefer to the figure below to answer the following questions. Real interest rate (percent per year Figure 7.2.2 DLF, DIF 0.5 2.0 1.0 1.5 Loonoble funds (villions of 2007 dollars) G Select one: OA. point F. OB. point G. OC. point H. OD. point /. DIF In Figure 7.2.2, an increase in expected profit will result in a movement from point E to E. either point / or point F. KYSELIN OF EATRA