Questions from Financial Markets

Q: Firms borrowing in developing countries such as Brazil often have to pay

Firms borrowing in developing countries such as Brazil often have to pay a higher default risk premium, ceteris paribus, than similar firms borrowing in the United States. Explain why this is the case...

Q: Offer an explanation to someone with no training in economics for why

Offer an explanation to someone with no training in economics for why the yield on US government bonds is used as a substitute for the risk-free rate.

Q: you read in the financial press that the recent flight to quality

you read in the financial press that the recent flight to quality is reversing. What will happen in the bond market?

Q: Explain why businesspeople should use the real interest rate instead of the

Explain why businesspeople should use the real interest rate instead of the nominal interest rate when making economic decisions.

Q: Explain why rapid changes in the rate of inflation, as well

Explain why rapid changes in the rate of inflation, as well as inflationary expectations, make business investment decisions difficult.

Q: If the ex- ante real interest rate is less than the

If the ex- ante real interest rate is less than the ex post real interest rate, which of the following happened?

Q: While Akerlof described adverse selection in the used car market, can

While Akerlof described adverse selection in the used car market, can you think of how adverse selection might arise in the labor market? Or even in dating?

Q: Austin has some money saved and is thinking about buying some corporate

Austin has some money saved and is thinking about buying some corporate stock. He can’t decide whether he should buy common stock or preferred stock. What things should affect his decision?

Q: The FOMC meets to decide which of the following?

The FOMC meets to decide which of the following?

Q: Crusty is an old-time investor who has not kept up

Crusty is an old-time investor who has not kept up with the changing structure of financial markets. How would you explain to Crusty how the differences between over the counter and stock exchanges ha...