which mortgage is riskier for lender? fixed rate mortgage to
adjustable rate mortgage? And why does the adjustable rate mortgage
have lower expected yield?
Flight to quality is the action of investors moving their
capital away from riskier investments to safer ones. Uncertainty in
the financial or international markets usually causes this
herd-like shift. However, at other times, the move may be an
instance of individual or smaller groups of investors cutting back
on the more volatile investments for conservative ones.
Discuss the relationship between flight to quality and stock
market liquidity with the view of systematic risk and unsystematic
risk.
Why is flight...
Committing large investments to a
single project is always risky, and it becomes even riskier when a
competitor is set to do the same thing and the market is not ready
to sustain two rival products. In the game called "The
Innovator's Dilemma" (or "The Developer's Dilemma"), there are two
identical firms, A and B, and each can make one of two choices, to
invest in the development of a new product or not to invest. If
only one of the...
Which one of the following investments provides the highest
effective annual rate of return (i.e., which of the following
investments is the BEST = the largest EAR) over an investment
horizon of 10 years)?
a. An investment which has a 3.0 percent nominal rate with
annual compounding.
b. An investment which has a 2.98 percent nominal rate with
semi-annual compounding.
c. An investment which has a 2.965 percent nominal rate with
quarterly compounding.
d. An investment which has a 2.9575...
Which one of the following investments provides the highest
effective annual rate of return (i.e., which of the following
investments is the BEST = the largest EAR) over an investment
horizon of 10 years)?
a. An investment which has a 3.0 percent nominal rate with
annual compounding.
b. An investment which has a 2.98 percent nominal rate with
semi-annual compounding.
c. An investment which has a 2.965 percent nominal rate with
quarterly compounding.
d. An investment which has a 2.9575...
Which of the following statements is CORRECT?
Select one:
If the stock becomes riskier, its price increases.
When the yield curve is strictly downward sloping, the term
spread must be negative.
Legal tender is the provision that shields owners of a
corporation from losing more than what they have invested in the
firm.
The market capitalization of a corporation is the total market
value of its stocks and bonds.
11. Which one of the following investments provides the highest
effective annual rate of return (i.e., which of the following
investments represents the largest EAR), assuming an investor wants
to avoid earning the lowest return over an investing horizon of 10
years? a. An investment which has a 3.0 percent nominal rate with
annual compounding. b. An investment which has a 2.98 percent
nominal rate with semi-annual compounding. c. An investment which
has a 2.965 percent nominal rate with quarterly...
If the interest rate is 6%, which of these investments would you prefer?
A single payment of $500 in year 3
A payment of $40 a year for 20 years starting in one year's time
A perpetuity of $30 a year starting in one year's time
A payment of $342.17 today