Quick Answers. For each of the following you only need to provide a one or two-w

Question

Quick Answers. For each of the following you only need to provide a one or two-word response (choose one of the underlined phrases for each statement).

a) When giving consideration to a crypto-currency like Bitcoin, we can say that is or is not a store of value, one of the functions of money?

b) Raising funds for your startup through Kickstarter, a “funding platform”, is direct or indirect finance?

c) Over the past 40 years, by total value of assets, commercial banks or mutual funds are collectively the largest in the United States?

d) Depository institutions such as commercial banks and credit unions have or don’t have the same primary source of funds.

e) If unexpected inflation occurs, people would rather be lenders or borrowers?

f) Suppose a newly-issued corporate bond (a standard coupon bond) has a coupon rate of 3% and a yield to maturity of 4%, then we know that the bond’s issuing price was lower or higher than the face value of the bond.

g) All else equal, as the price of a coupon bond goes down, the yield to maturity will increase or decrease?

h) In the liquidity preference framework, an increase in interest rates will increase or decrease the quantity demand for money?

i) All else equal, an increase in the default risk of a bond relative to alternative bonds will increase or decrease the yield to maturity of that bond?

j) All else equal, the liquidity of a bond decreases as the broker-dealer fees increase or decrease?

Explanation / Answer

A) Crypto currency is something that is generated by computer model and there are limited number of currency it will generate it is a whole new concept. Traditional money used to have value until central banks around the world just printed out money recklessly

B) It cannot be termed as direct finance as direct finance involves two parties entering into aggrement like a bank and company. This one is indirect funding

C) They are the largest. They even have a saying that they are too big to fail so government went after and protected them

D) credit unions are different from commerical banks so their source of primary funding is different.

E) If unexpected inflation occurs we better borrow money. ( At low intrest)

G) Decrease, because YTM ( yield to maturity) is something that gets affected by coupon rate

H) ofcourse decrease, If intrest rates are high people will stay away from investment so less demand for money

I) Risky bonds always pay more than non-risky bonds this is universal

J) It will increase as broker needs to go through more problems to encash it,

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