essay questions from the list. A. The “Supply and Demand” analysis for bonds off
ID: 2760938 • Letter: E
Question
essay questions from the list.
A. The “Supply and Demand” analysis for bonds offers a theory for how interest rates are determined.
1. List the Demand factors that affect interest rates.
2. List the Supply factors that affect interest rates.
3. Which factors do you believe are most important in determining interest rates?
B. Issuing bonds are an important mechanism for attracting capital into the financial markets.
1. What is the importance of Credit-Rating Agencies?
2. List at least two (2) credit-rating agencies in the US.
3. Explain how they affect the efficiency of Capital Markets.
C. Junk bonds are common in the secondary market.
1. Explain what is a “Junk” bond.
2. If they are NOT “Investment” grade, then why are they popular with investors?
3. Discuss an example of a “Junk” bond that would be a very profitable investment.
D. It is hard to avoid “conflicts of interest” in financial markets.
1. Why is it so important to identify a conflict of interest?
2. Discuss a specific finance example.
3. Explain how financial markets operate to minimize “conflicts of interest.”
E. Financial Engineering has been blamed as an important cause of the 2008 Financial Crisis.
1. Explain the advantages of “Financial Engineering.”
2. Explain the disadvantages of “Financial Engineering.”
3. Provide an example of “Financial Engineering.” Who benefited the most from this financial innov
A. Trillions of dollars in asset value disappeared after the peak of the 2006 Asset Bubble.
1. What factors do you think were most important in the 2008 Financial Meltdown?
2. How did they impact the confidence in the financial markets?
3. What policies do you think are most important in preventing a future financial crisis? Explain.
B. Financial Innovation and Liberalization contributed to the Global Financial Crisis.
1. Explain how specific examples of “Financial Innovation” negatively impacted financial markets during this period.
2. Explain how specific examples of “Financial Liberalization” negatively impacted financial markets during this period.
3. How did consumer lending and bank supervisory regulation contribute to the Financial Crisis? Could it Happen Again? Explain.
Explanation / Answer
A)1) Ans:-Demand Factors that affect interest rates are i) Inflation. ii) Economic State
2) Ans:-Supply Related Factors that affect intrest rates i) Monetary policy ii) Fiscal Policy.
3) Determining Intrest rates Supply Factors which affects mostly.
B) 1) Ans:-Credit rating Agencies are very important at the coutry level. Many countries rely on foreign investors to purchase their debt,and these investors rely heavily on the credit ratings given by the credit rating agencies. The benefits for a country of a good credit rating include being able to access funds from outside their country, and the possession of a good rating can attract other forms of investment to a country, such as FOREIGN DIRECT INVESTMENT.
2)Ans:-Standard & Poor's (S&P), Moody's Investors service , Fitch ratings
3 ) Ans:- By giving ratings credit rating agencies gives investor to invest in right way for their investment in the respective coutries they like and give present economic condition and standards by giving international ratings.
C)1)Ans:- JUNK BOND :- a high -yielding high-risk security, typically issued by a company seeking to raise capital quickly in order to finance a takeover.
2)Ans:- JUNK BOND gives larger returns than CD's
3 ) Ans:- Barclays
D) 1) Ans:- Maintaining the integrity of professional judgment and sustaining public confidence in that judgement.
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