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.

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Answer 1

Question

Chapter 10, Problem 17P

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 17P

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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Problem 3 You are given the following demand for European luxury automobiles: Q=1,000 P-0.5.2/1.6 where P-Price of European luxury cars PA = Price of American luxury cars P, Price of Japanese luxury cars I= Annual income of car buyers Assume that each of the coefficients is statistically significant (i.e., that they passed the t-test). On the basis of the information given, answer the following questions 1. Comment on the degree of substitutability between European and American luxury cars and between European and Japanese luxury cars. Explain some possible reasons for the results in the equation. 2. Comment on the coefficient for the income variable. Is this result what you would expect? Explain. 3. Comment on the coefficient of the European car price variable. Is that what you would expect? Explain.

Problem 2: A manufacturer of computer workstations gathered average monthly sales figures from its 56 branch offices and dealerships across the country and estimated the following demand for its product: Q=+15,000-2.80P+150A+0.3P+0.35Pm+0.2Pc (5,234) (1.29) (175) (0.12) (0.17) (0.13) R²=0.68 SER 786 F=21.25 The variables and their assumed values are P = Price of basic model = 7,000 Q==Quantity A = Advertising expenditures (in thousands) = 52 P = Average price of a personal computer = 4,000 P. Average price of a minicomputer = 15,000 Pe Average price of a leading competitor's workstation = 8,000 1. Compute the elasticities for each variable. On this basis, discuss the relative impact that each variable has on the demand. What implications do these results have for the firm's marketing and pricing policies? 2. Conduct a t-test for the statistical significance of each variable. In each case, state whether a one-tail or two-tail test is required. What difference, if any, does it make to…

Answer 2

Question

Chapter 10, Problem 17P

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 17P

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 17P

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 17P

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 17P

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 17P

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 17P

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 17P

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 17P

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 17P

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 17P

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 17P

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 17P

Explanation of Solution

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