金融市场习题.docx

1、金融市场习题 金融市场习题 Moral hazard: The risk that one party to a transaction will engage in behavior that is undesirable from the other partys point of view. Yield to maturity: The interest rate that equates the present value of payments received from a credit market instrument with its value today. Option

2、contracts: Contracts that give the purchaser the option to buy or sell the underlying financial instrument at a specified price, called the exercise price or strike price, within a specific period of time. Capital market: A financial market in which longer-term debt (maturity of greater than one yea

3、r) and equity instruments are traded. If there is a decline in interest rates, which would you rather be holding, long-term bonds or short-term bonds? Why? Which type of bond has the greater interest-rate risk? You would rather be holding long-term bonds because their price would increase more than

4、the price of the short-term bonds, giving them a higher return. What effect will a sudden increase in the volatility of gold prices have on interest rates? Interest rates would rise. A sudden increase in peoples expectations of future real estate prices raises the expected return on real estate rela

5、tive to bonds, so the demand for bonds falls. The demand curve Bd shifts to the left, and the equilibrium interest rate rises. What characteristics define the money markets? The money markets can be characterized as having securities that trade in one year or less, are of large denomination, and are

6、 very liquid. 1. Why are finance markets important to the health of the economy? Because they channel funds from those who do not have a productive use for them to those who do, thereby resulting in higher economic efficiency. 2. When interest rate rise, how might businesses and consumers change the

7、ir economic behavior? Businesses would cut investment spending because the cost of financing this spending is now higher, and consumers would be less likely to purchase a house or a car because the cost of financing their purchase is higher. 3. How can a change in interest rates affect the profitabi

8、lity of financial institutions? A change in interest rates affects the cost of acquiring funds for financial institutions as well as changes the income on assets such as loans, both of which affect profits. In addition, changes in interest rates affect the price of assets such as stock and bonds tha

9、t the financial institution owns which can lead to profits or losses. 4. Is everybody worse off when interest rates rise? No. People who borrow to purchase a house or a car are worse off because it costs them more to finance their purchase; however, savers benefit because they can earn higher intere

10、st rates on their savings. 5. What effect might a fall in stock prices have on business investment? s shares means that it can raise a smaller amount of funds, and so investment in The lower price for a firm plant and equipment will fall. 6. What effect might a rise in stock prices have on consumers

11、 decisions to spend? Higher stock prices mean that consumers wealth is higher and so they will be more likely to increase their spending. 7. How does a decline in the value of the pound sterling affect British consumers? It makes foreign goods more expensive and so British consumers will buy less fo

12、reign goods and more domestic goods. 8. How does a decline in the value of the pound sterling affect American businesses? It makes British goods more expensive relative to American goods. America businesses will find it easier to sell their goods in the United States and abroad, and the demand for t

13、heir products will rise. 9. How can changes in foreign exchange rates affect the profitability of financial institutions? Changes in foreign exchange rates change the value of assets held by financial and thus lead to gains and losses on these assets. Also changes in foreign exchange rates affect th

14、e profits made by traders in foreign exchange who work for financial institutions. 10. Looking at Figure 3.in what years would you have chosen to visit the Grand Canyon in Arizona rather than the Tower of London? In the mid- to late 1970s and the late 1980s and early 1990s, the value of the dollar w

15、as low, making travel abroad relatively more expensive; that would have been a good time to vacation in the United States and see the Grand Canyon. As the dollars value rose in the early 1980s, travel abroad became relatively cheaper, making it a good time to visit the Tower of London. 11. What is t

16、he basic activity of banks? Banks accept deposits and then use the resulting funds to make loans. 12. What are the other important financial intermediaries in the economy besides banks? Savings and loan associations, mutual savings banks, credit unions, insurance companies, mutual funds, pension funds, and finance companies. 13. Can you