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Question;1. Answer the following questions:1.1) How would economic transactions between suppliers of funds (e.g., households) and users of funds (e.g., corporations) occur in a world without FIs?1.2) How did the boom in the housing market in the early and mid-2000s exacerbate FIs transition away from their role as specialists in risk measurement and management?1.3) How does the liquidity premium theory of the term structure of interest rates differ from the unbiased expectations theory? In a normal economic environment, that is, an upward-sloping yield curve, what is the relationship of liquidity premiums for succesive years into the future? Why?1.4) Calculate the future value in five years of $5,000 received today if your investments paya. 6 percent compounded annuallyb. 8 percent compounded annuallyc. 10 percent compounded annuallyd. 10 percent compounded semiannuallye. 10 percent compounded quarterlyWhat do your answers to these questions tell you about the relation between future values and interest rates and between future values and the number of compounding periods per year?1.5) How is duration related to the interest elasticity of a fixed-income security? What is the relationship between duration and the price of a fixed-income security?1.6) Calculate the fair present values of the following bonds, all of which pay interest semiannually, have a face value of $1,000, have 12 years remaining to maturity, and have a required rate of return of 10 percent.a. The bond has a 6 percent coupon rate.b. The bond has a 8 percent coupon rate.c. The bond has a 10 percent coupon rate.d. What do your answers to part (a) through (c) say about the relation between coupon rates and present values?Answer the following questions and provide the web site per each questions in references. (Research)2.During the financial crisis and afterwards gold prices skyrocketed. Discuss why gold prices changed. Is gold always a good investment in uncertain times? Discuss3.What do you think of the Fed?s dual goal of stimulating growth and limiting inflation? Should one or the other of these be the top priority?4. U.K. insurance regulators recently ruled that U.K. insurers can no longer charge higher auto insurance rates to men than to women. Do you agree or disagree with this ruling? Isn?t charging different rates gender discrimination? What are the pros and cons of each side of the argument?5. Procure estimates of current mortgage rates, including discount points, on 30 year fixed rate mortgage payments for a $200,000 conventional mortgage from four mortgage lenders. Is it worth it to pay any of the required points if you can only count on being in the house 4 to 5 years? Explain.6.What does it mean when we say the U.S. dollar is the world?s reserve currency? What was the reserve currency before the U.S. dollar? What caused the change? Is it likely that the dollar will retain its reserve currency status over the next several decades? Explain.**Please show step by step if any calculations are required.(Chapter 1,2 and 3)


Paper#48905 | Written in 18-Jul-2015

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