Question

Which of the following organizations was bailed out with significant funding from the Federal Reserve? a....

Which of the following organizations was bailed out with significant funding from the Federal Reserve?

a. Long-Term Capital Management hedge fund

b. Lehman Brothers

c. Ford Motor Company

d. Orange County pension fund

-----------------------------------------------------------------------------------------------------------------------

How do depository institutions attempt to maintain a profitable business?

a. Accepting interest rate risk for its customers

b. Earning a positive spread between their assets and their cost of funds

c. Borrowing funds from the Federal Reserve’s discount window

d. By “buying” funds for more than they “sell” funds

e. All of the above

---------------------------------------------------------------------------------------------------------------

Suppose a Treasury Inflation-Protected Security (TIPS) has a par value of $10,000 and an annual coupon rate of 5%. If the inflation rate is 2% for the first 6 months and 3% for the remaining 6 months of the year, then what will be the approximate coupon payment at the end of the year?

a. $200

b. $500

c. $510

d. $525

e. None of the above

-------------------------------------------------------------------------------------------------------------------

High yield bonds are

a. commonly called junk bonds

b. issues with quality ratings designated as non-investment grade

c. issues that may have been rated investment-grade at the time of issue but have since been down-graded to non-investment grade

d. all of the above

e. both a. and b.

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

1. Answer is C.

Ford was not part of the Troubled Asset Relief Program (TARP) but receive huge loans from the government.

2. Answer is B

Any depository will earn profit if they lend at higher rate to their clients than what they are offering to their customers

3. Answer is E

Face value = 10,000

Coupon = 5%

Coupon payment = 500

Inflation is 1st 6 months = 2%

Inflation in next 6 months = 3%

Average inflation = 2.5%

New face value after 2.5% inflation adjustment = 10,000*1.025 = 10,250

Coupon payment = 0.05* 10,250 = 512.5

4. Answer is E

High yield bonds are bonds which carry higher risk and demand higher compensation. They are also catagorized into junk bond and non investment grade bond due to high risk involved.

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Which of the following is the interest rate that the federal reserve charges to private banks...
Which of the following is the interest rate that the federal reserve charges to private banks that borrow directly from it? a. The federal funds rate b. Bond rate c. The inflation rate d. The discount rate e. The prime lending rate
1) Pick the FALSE statement with regard to non-investment grade debt A. They have a credit...
1) Pick the FALSE statement with regard to non-investment grade debt A. They have a credit rating of A by Moody's and DBRS B. They are used as an attractive financing vehicle C. They are junk bonds D. They are high-yield 2) The provision that facilitates the orderly retirement of the bond issue is known as A. a retractable clause B. a redemption clause C. a sinking fund D. a retirement clause 3) A bond with a 17% coupon rate,...
1. The Federal Reserve Act says that the Fed must try to achieve​ ______. A. a...
1. The Federal Reserve Act says that the Fed must try to achieve​ ______. A. a balanced budget B. maximum​ employment, stable​ prices, and moderate​ long-term interest rates C. a stable U.S. dollar on foreign exchange markets and moderate​ long-term and​ short-term interest rates D. an economic environment in which investment in U.S. stock and money markets is encouraged The Federal Reserve Act says that the Fed must use​ ______ to achieve its objectives. A. bank reserves B. commercial banks...
1. When the Fed purchases government bonds, that tends to ___ the federal funds rate and...
1. When the Fed purchases government bonds, that tends to ___ the federal funds rate and ___ the prime rate. a. increase; increase b. increase; decrease c. decrease; increase d. decrease; decrease e. None of the above 2. How does the Federal Reserve affect the supply of money using open market operations? a. The Fed increases the reserve requirements of bank and thus banks must obtain additional funds from the Fed. b. The Fed buys government bonds from banks, which...
2) The Federal Reserve issues a report indicating that future inflation will be higher than had...
2) The Federal Reserve issues a report indicating that future inflation will be higher than had previously seemed likely. As a result A) the supply curve for bonds shifts to the right. B) the demand curve for loanable funds shifts to the left. C) the equilibrium interest rate falls. D) the equilibrium price of bonds rises. Answer: A 7) As a result of higher expected inflation A) the demand and supply curves for bonds both shift to the right and...
a) If the federal funds rate were below the level the Federal Reserve had targeted, the...
a) If the federal funds rate were below the level the Federal Reserve had targeted, the Fed could move the rate back towards its target by buying bonds. This buying would reduce reserves. buying bonds. This buying would increase reserves. selling bonds. This selling would reduce reserves. selling bonds. This selling would increase reserves. b)  Last year a country had exports of $50 billion, imports of $60 billion, and domestic investment of $40 billion. What was its saving last year? a....
2.         The Federal Reserve Banks do all but which one of the following? A. Conduct...
2.         The Federal Reserve Banks do all but which one of the following? A. Conduct monetary policy B. Supervise and regulate bank activities C. Serve as the commercial bank for the U.S. Treasury D. Operate check clearing and wire transfer facilities E. Conduct fiscal policy 3.         Currently the Fed primarily sets monetary policy by targeting A. the fed funds rate. B. the prime rate. C. the level of non-borrowed reserves. D. the level of borrowed reserves. E. the...
Which of these increase or decrease the money supply? A) Federal Reserve buys bonds in open-market...
Which of these increase or decrease the money supply? A) Federal Reserve buys bonds in open-market operation. B) Federal Reserve reduces the reserve requirement. C) Federal Reserve increases the interest rate it pays on reserves. D) Citibank repays a loan it had previously taken from the Federal Reserve. E) After a rash of pickpocketing, people decide to hold less currency. F) Fearful of bank runs, bankers decide to hold more excess reserves. G) The FOMC increase its target for the...
Samantha is a newly appointed member of the Federal Reserve. If inflation is​ increasing, it is...
Samantha is a newly appointed member of the Federal Reserve. If inflation is​ increasing, it is likely that Samantha and her colleagues will recommend that the Fed​_____. A. decrease the reserve requirement B. limit check processing C. increase the discount rate D. limit foreign currency transactions E. buy Treasury notes and bonds
Which of the following tools does the Federal Reserve no longer use for monetary policy? Choose...
Which of the following tools does the Federal Reserve no longer use for monetary policy? Choose one or more: A. reserve requirements B. federal funds rate C. discount rate D. open market operations
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT