Bonds: It is a type of promise or contract to pay in the future with certain limitations and conditions specified at the time of issuing the bond. Securitization: It is generally a type of pooling under which the loan taken by an individual is pooled and later on it is sold in the form of bonds. Recession: Every economy has some business cycle. It is one of the business cycle in which there is an excess amount of goods supplied but the demand is very low. During a recession, unemployment is very high.

Question

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Answer 1

Question

Chapter 10, Problem 16P

To determine

Concept Introduction:

Bonds: It is a type of promise or contract to pay in the future with certain limitations and conditions specified at the time of issuing the bond.

Securitization: It is generally a type of pooling under which the loan taken by an individual is pooled and later on it is sold in the form of bonds.

Recession: Every economy has some business cycle. It is one of the business cycle in which there is an excess amount of goods supplied but the demand is very low. During a recession, unemployment is very high.

Expert Solution & Answer

Answer to Problem 16P

a. Securitization

The process is called securitization. It leads to diversification and provide liquidity.

Explanation of Solution

When Mae packages individual students’ loans into pools of loans and sells shares of these pools to investors, then this process is called securitization.

The effects of securitization are that it helps in the greater diversification of portfolios for an investor comparative to the situation when they could only buy and sell individual student loans.

It also provides liquidity as the bond is very flexible as it can be sold and bought any time.

b. Effects on the Accessibility of Loans

The ability of students to get loans will increase due to a fall in interest rates.

Mae action will have positive effect on the ability of students to get loans. This will certainly help students in getting loans at lower interest rates because investors are ready to provide funds for students as compared to the situation when there is only an individual loan available.

c. Loans during Recession

Recession adversely affects the availability of the loan and profit to investors during the time of recession.

During severe recession, many graduating students become unemployed and default on their student loans. Default by many students led to a rise in interest rates on the bond in order to attract investors.

Investors now believe that Mae bond is riskier than the earlier. It is because the interest rate has increased to attract them to buy the bond which makes the investor expect the same situation in the future and make them worse.

The availability of the loan during recession would certainly decrease. During recession there is a huge unemployment due to which students will not be able to get jobs and repay their loans.

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Students have asked these similar questions

Please answer questions D-H, I have already answered A , B,C but it may help you to still solve them yourself. Thank you!

2. A firm’s production function is given by:Q = 10KLThe unit capital and labour costs are 2 and 1 pounds respectively. The firm is contracted to produce2000 units.(a) Write out the optimisation problem of the firm. (b) Express this problem using a Lagrangian function. (c) Find values of K and L which fulfil the contract with minimal cost to the firm. (d) Calculate the total cost to the firm.

3. Consider the following estimated regression equation, estimated using a sample of firms, where RDis total firm spending on research and development in USD ($), Revenue is total firm revenuein USD ($), and W ages is the firms’ total spending on wages in USD ($) (standard errors inparentheses):RDd = 1000(600)+ 0.5(0.1)Revenue + 1.5(0.5)W ages,(a) Interpret the coefficients on each of the explanatory variables. (b) Which of the three coefficients are statistically significant at the 5% level of significance? Howdo you know? A researcher runs a two-sided statistical test of the null hypothesis that both the coefficients onthe explanatory variables above are jointly equal to 0.25 (mathematically, that β1 = β2 = 0.25),and reports a p-value of 0.045.(c) What does this p-value mean for the outcome of the test? (d) What would an appropriate two-sided alternative hypothesis look like?

Answer 2

Question

Chapter 10, Problem 16P

To determine

Concept Introduction:

Bonds: It is a type of promise or contract to pay in the future with certain limitations and conditions specified at the time of issuing the bond.

Securitization: It is generally a type of pooling under which the loan taken by an individual is pooled and later on it is sold in the form of bonds.

Recession: Every economy has some business cycle. It is one of the business cycle in which there is an excess amount of goods supplied but the demand is very low. During a recession, unemployment is very high.

Expert Solution & Answer

Answer to Problem 16P

a. Securitization

The process is called securitization. It leads to diversification and provide liquidity.

Explanation of Solution

When Mae packages individual students’ loans into pools of loans and sells shares of these pools to investors, then this process is called securitization.

The effects of securitization are that it helps in the greater diversification of portfolios for an investor comparative to the situation when they could only buy and sell individual student loans.

It also provides liquidity as the bond is very flexible as it can be sold and bought any time.

b. Effects on the Accessibility of Loans

The ability of students to get loans will increase due to a fall in interest rates.

Mae action will have positive effect on the ability of students to get loans. This will certainly help students in getting loans at lower interest rates because investors are ready to provide funds for students as compared to the situation when there is only an individual loan available.

c. Loans during Recession

Recession adversely affects the availability of the loan and profit to investors during the time of recession.

During severe recession, many graduating students become unemployed and default on their student loans. Default by many students led to a rise in interest rates on the bond in order to attract investors.

Investors now believe that Mae bond is riskier than the earlier. It is because the interest rate has increased to attract them to buy the bond which makes the investor expect the same situation in the future and make them worse.

The availability of the loan during recession would certainly decrease. During recession there is a huge unemployment due to which students will not be able to get jobs and repay their loans.

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Answer 3

Question

Chapter 10, Problem 16P

To determine

Concept Introduction:

Bonds: It is a type of promise or contract to pay in the future with certain limitations and conditions specified at the time of issuing the bond.

Securitization: It is generally a type of pooling under which the loan taken by an individual is pooled and later on it is sold in the form of bonds.

Recession: Every economy has some business cycle. It is one of the business cycle in which there is an excess amount of goods supplied but the demand is very low. During a recession, unemployment is very high.

Expert Solution & Answer

Answer to Problem 16P

a. Securitization

The process is called securitization. It leads to diversification and provide liquidity.

Explanation of Solution

When Mae packages individual students’ loans into pools of loans and sells shares of these pools to investors, then this process is called securitization.

The effects of securitization are that it helps in the greater diversification of portfolios for an investor comparative to the situation when they could only buy and sell individual student loans.

It also provides liquidity as the bond is very flexible as it can be sold and bought any time.

b. Effects on the Accessibility of Loans

The ability of students to get loans will increase due to a fall in interest rates.

Mae action will have positive effect on the ability of students to get loans. This will certainly help students in getting loans at lower interest rates because investors are ready to provide funds for students as compared to the situation when there is only an individual loan available.

c. Loans during Recession

Recession adversely affects the availability of the loan and profit to investors during the time of recession.

During severe recession, many graduating students become unemployed and default on their student loans. Default by many students led to a rise in interest rates on the bond in order to attract investors.

Investors now believe that Mae bond is riskier than the earlier. It is because the interest rate has increased to attract them to buy the bond which makes the investor expect the same situation in the future and make them worse.

The availability of the loan during recession would certainly decrease. During recession there is a huge unemployment due to which students will not be able to get jobs and repay their loans.

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Answer 4

Question

Chapter 10, Problem 16P

To determine

Concept Introduction:

Bonds: It is a type of promise or contract to pay in the future with certain limitations and conditions specified at the time of issuing the bond.

Securitization: It is generally a type of pooling under which the loan taken by an individual is pooled and later on it is sold in the form of bonds.

Recession: Every economy has some business cycle. It is one of the business cycle in which there is an excess amount of goods supplied but the demand is very low. During a recession, unemployment is very high.

Expert Solution & Answer

Answer to Problem 16P

a. Securitization

The process is called securitization. It leads to diversification and provide liquidity.

Explanation of Solution

When Mae packages individual students’ loans into pools of loans and sells shares of these pools to investors, then this process is called securitization.

The effects of securitization are that it helps in the greater diversification of portfolios for an investor comparative to the situation when they could only buy and sell individual student loans.

It also provides liquidity as the bond is very flexible as it can be sold and bought any time.

b. Effects on the Accessibility of Loans

The ability of students to get loans will increase due to a fall in interest rates.

Mae action will have positive effect on the ability of students to get loans. This will certainly help students in getting loans at lower interest rates because investors are ready to provide funds for students as compared to the situation when there is only an individual loan available.

c. Loans during Recession

Recession adversely affects the availability of the loan and profit to investors during the time of recession.

During severe recession, many graduating students become unemployed and default on their student loans. Default by many students led to a rise in interest rates on the bond in order to attract investors.

Investors now believe that Mae bond is riskier than the earlier. It is because the interest rate has increased to attract them to buy the bond which makes the investor expect the same situation in the future and make them worse.

The availability of the loan during recession would certainly decrease. During recession there is a huge unemployment due to which students will not be able to get jobs and repay their loans.

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Answer 5

Chapter 10, Problem 16P

To determine

Concept Introduction:

Bonds: It is a type of promise or contract to pay in the future with certain limitations and conditions specified at the time of issuing the bond.

Securitization: It is generally a type of pooling under which the loan taken by an individual is pooled and later on it is sold in the form of bonds.

Recession: Every economy has some business cycle. It is one of the business cycle in which there is an excess amount of goods supplied but the demand is very low. During a recession, unemployment is very high.

Expert Solution & Answer

Answer to Problem 16P

a. Securitization

The process is called securitization. It leads to diversification and provide liquidity.

Explanation of Solution

When Mae packages individual students’ loans into pools of loans and sells shares of these pools to investors, then this process is called securitization.

The effects of securitization are that it helps in the greater diversification of portfolios for an investor comparative to the situation when they could only buy and sell individual student loans.

It also provides liquidity as the bond is very flexible as it can be sold and bought any time.

b. Effects on the Accessibility of Loans

The ability of students to get loans will increase due to a fall in interest rates.

Mae action will have positive effect on the ability of students to get loans. This will certainly help students in getting loans at lower interest rates because investors are ready to provide funds for students as compared to the situation when there is only an individual loan available.

c. Loans during Recession

Recession adversely affects the availability of the loan and profit to investors during the time of recession.

During severe recession, many graduating students become unemployed and default on their student loans. Default by many students led to a rise in interest rates on the bond in order to attract investors.

Investors now believe that Mae bond is riskier than the earlier. It is because the interest rate has increased to attract them to buy the bond which makes the investor expect the same situation in the future and make them worse.

The availability of the loan during recession would certainly decrease. During recession there is a huge unemployment due to which students will not be able to get jobs and repay their loans.

Answer 6

Chapter 10, Problem 16P

To determine

Concept Introduction:

Bonds: It is a type of promise or contract to pay in the future with certain limitations and conditions specified at the time of issuing the bond.

Securitization: It is generally a type of pooling under which the loan taken by an individual is pooled and later on it is sold in the form of bonds.

Recession: Every economy has some business cycle. It is one of the business cycle in which there is an excess amount of goods supplied but the demand is very low. During a recession, unemployment is very high.

Expert Solution & Answer

Answer to Problem 16P

a. Securitization

The process is called securitization. It leads to diversification and provide liquidity.

Explanation of Solution

When Mae packages individual students’ loans into pools of loans and sells shares of these pools to investors, then this process is called securitization.

The effects of securitization are that it helps in the greater diversification of portfolios for an investor comparative to the situation when they could only buy and sell individual student loans.

It also provides liquidity as the bond is very flexible as it can be sold and bought any time.

b. Effects on the Accessibility of Loans

The ability of students to get loans will increase due to a fall in interest rates.

Mae action will have positive effect on the ability of students to get loans. This will certainly help students in getting loans at lower interest rates because investors are ready to provide funds for students as compared to the situation when there is only an individual loan available.

c. Loans during Recession

Recession adversely affects the availability of the loan and profit to investors during the time of recession.

During severe recession, many graduating students become unemployed and default on their student loans. Default by many students led to a rise in interest rates on the bond in order to attract investors.

Investors now believe that Mae bond is riskier than the earlier. It is because the interest rate has increased to attract them to buy the bond which makes the investor expect the same situation in the future and make them worse.

The availability of the loan during recession would certainly decrease. During recession there is a huge unemployment due to which students will not be able to get jobs and repay their loans.

Answer 7

Chapter 10, Problem 16P

To determine

Concept Introduction:

Bonds: It is a type of promise or contract to pay in the future with certain limitations and conditions specified at the time of issuing the bond.

Securitization: It is generally a type of pooling under which the loan taken by an individual is pooled and later on it is sold in the form of bonds.

Recession: Every economy has some business cycle. It is one of the business cycle in which there is an excess amount of goods supplied but the demand is very low. During a recession, unemployment is very high.

Answer 8

Expert Solution & Answer

Answer to Problem 16P

a. Securitization

The process is called securitization. It leads to diversification and provide liquidity.

Answer 9

Expert Solution & Answer

Answer 10

Expert Solution & Answer

Answer 11

Explanation of Solution

When Mae packages individual students’ loans into pools of loans and sells shares of these pools to investors, then this process is called securitization.

The effects of securitization are that it helps in the greater diversification of portfolios for an investor comparative to the situation when they could only buy and sell individual student loans.

It also provides liquidity as the bond is very flexible as it can be sold and bought any time.

b. Effects on the Accessibility of Loans

The ability of students to get loans will increase due to a fall in interest rates.

Mae action will have positive effect on the ability of students to get loans. This will certainly help students in getting loans at lower interest rates because investors are ready to provide funds for students as compared to the situation when there is only an individual loan available.

c. Loans during Recession

Recession adversely affects the availability of the loan and profit to investors during the time of recession.

During severe recession, many graduating students become unemployed and default on their student loans. Default by many students led to a rise in interest rates on the bond in order to attract investors.

Investors now believe that Mae bond is riskier than the earlier. It is because the interest rate has increased to attract them to buy the bond which makes the investor expect the same situation in the future and make them worse.

The availability of the loan during recession would certainly decrease. During recession there is a huge unemployment due to which students will not be able to get jobs and repay their loans.

Answer 12

Ch. 10.A - Prob. 1P Ch. 10.A - Prob. 2P Ch. 10.A - Prob. 3P Ch. 10 - Prob. 1QFT Ch. 10 - Prob. 2QFT Ch. 10 - Prob. 3QFT Ch. 10 - Prob. 1P Ch. 10 - Prob. 2P Ch. 10 - Prob. 3P Ch. 10 - Prob. 4P

Answer to Problem 16P

Explanation of Solution

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