Which of the following did NOT happen in September 2008? A. The U.S. government

Question

Which of the following did NOT happen in September 2008?

A. The U.S. government placed Fannie Mae and Freddie Mac into conservatorship and guaranteed their debt.

B. The investment bank Lehman Brothers filed for bankruptcy.

C. The Reserve Primary money market mutual fund broke the buck (i.e., had a negative return on its investment portfolio) due to its holdings of the Lehman Brothers commercial paper.

D. The Federal Reserve bailed out a large insurance company, AIG, with an $85 billion loan.

E. The investment bank Bear Stearns was forced into a sale to JP Morgan.

Which of the following is consistent with a flight to quality in the money markets?

A. A decrease in the outstanding amount of money market instruments whose perceived credit risk has increased.

B. The repo market moving toward requiring securities with the lowest perceived credit risk as collateral.

C. The repo market increasing haircuts on collateral whose perceived credit risk has increased.

D. Widening spread between the yields of risky and riskless money market instruments

E. All of the above

Explanation / Answer

Answer for 1st question will be E as it happened in March 2008 not September 2008.

For 2nd question as well answer will be option E because in flight of quality scenario all mention things happens.

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