Questions from General Investment

Q: Consider a bond with a 10% coupon and with yield to

Consider a bond with a 10% coupon and with yield to maturity = 8%. If the bond’s yield to maturity remains constant, then in one year will the bond price be higher, lower, or unchanged? Why?

Q: Suppose that every time a fund manager trades stock, transaction costs

Suppose that every time a fund manager trades stock, transaction costs such as commissions and bid–ask spreads amount to 0.4% of the value of the trade. If the portfolio turnover rate is 50%, by how m...

Q: A bond with an annual coupon rate of 4.8%

A bond with an annual coupon rate of 4.8% sells for $970. What is the bond’s current yield?

Q: For each transaction, identify the real and/or financial assets

For each transaction, identify the real and/or financial assets that trade hands. Are any financial assets created or destroyed in the transaction? a. Toyota takes out a bank loan to finance the cons...

Q: Suppose that in a wave of pessimism, housing prices fall by

Suppose that in a wave of pessimism, housing prices fall by 10% across the entire economy. a. Has the stock of real assets of the economy changed? b. Are individuals less wealthy? c. Can you reconc...

Q: Lanni Products is a start-up computer software development firm.

Lanni Products is a start-up computer software development firm. It currently owns computer equipment worth $30,000 and has cash on hand of $20,000 contributed by Lanni’s owners. For each of the follo...

Q: Reconsider Lanni Products from Problem 9. a. Prepare its

Reconsider Lanni Products from Problem 9. a. Prepare its balance sheet just after it gets the bank loan. What is the ratio of real assets to total assets? b. Prepare the balance sheet after Lanni sp...

Q: What reforms to the financial system might reduce its exposure to systemic

What reforms to the financial system might reduce its exposure to systemic risk?

Q: Examine the balance sheet of commercial banks in Table 1.3

Examine the balance sheet of commercial banks in Table 1.3. a. What is the ratio of real assets to total assets? b. What is that ratio for nonfinancial firms (Table 1.4)? c. Why should this differe...

Q: Why do financial assets show up as a component of household wealth

Why do financial assets show up as a component of household wealth, but not of national wealth? Why do financial assets still matter for the material well-being of an economy?