Questions from Financial Markets

Q: When stock market volatility is high, corporate bond yields tend to

When stock market volatility is high, corporate bond yields tend to increase. Which market forces cause the increase in corporate bond yields under these conditions?

Q: The Fed’s open market operations can change the money supply, which

The Fed’s open market operations can change the money supply, which can affect the risk-free rate offered on bonds. Why might the Fed’s policy also affect the risk premium on corporate bonds?

Q: Explain the effects of a stimulative monetary policy on a firm’s cost

Explain the effects of a stimulative monetary policy on a firm’s cost of capital.

Q: Assume the yield curve experiences a sudden shift, such that the

Assume the yield curve experiences a sudden shift, such that the new yield curve is higher and more steeply sloped today than it was yesterday. If a firm issues new bonds today, would its bonds sell f...

Q: Consider the prevailing conditions for inflation (including oil prices), the

Consider the prevailing conditions for inflation (including oil prices), the economy, the budget deficit, and the Fed’s monetary policy that could affect interest rates. Based on these conditions, do...

Q: Explain how the prices of bonds were affected by a change in

Explain how the prices of bonds were affected by a change in the risk-free rate during the credit crisis that began in 2008. Explain how bond prices were affected by a change in the credit risk premiu...

Q: Describe how collateralized mortgage obligations (CMOs) are used and why

Describe how collateralized mortgage obligations (CMOs) are used and why they have been popular.

Q: Explain how the maturity of mortgage-backed securities can be affected

Explain how the maturity of mortgage-backed securities can be affected by interest rate movements.

Q: Assume that the Fed adopts an inflation-targeting strategy. If

Assume that the Fed adopts an inflation-targeting strategy. If oil prices rise abruptly by 15 percent in response to an oil shortage, describe how the Fed’s monetary policy would be affected by this s...

Q: Consider the prevailing conditions for inflation (including oil prices), the

Consider the prevailing conditions for inflation (including oil prices), the economy, the budget deficit, and the Fed’s monetary policy that could affect interest rates. Based on the prevailing condit...