Question

35. Describe the difference in fee structures between hedge funds and mutual funds. Name two mutual fund complexes.

37. What is the current 10-year treasury rate? What is the current Federal Funds Rate target. Do you think the next move will be up or down? Why? What has changed recently and why?

38. Describe what Credit Default Swaps are. Can they be abused? "Burning down the house"'. What does Warren Buffet cal derivtives?

43. What is the concept of " too big to fail"? Explain

Answer 1

35.Mutual fund charge a fixed amount of fees as a percentage of total AUM while Hedge fund charge a fixed amount as well a percentage of gains

Two mutual fund complexes are HDFC and BLACKROCK

37.Treasuries Rate are falling as people are fearing an impending recession and fund will cut rates to zero.

10 year treasury yields currently at .50

I think it will continue to fall among these uncertain economic scenarios.

38.Credit default swaps are a swaps for transferring risk of credit default of a borrower to other party. They can be abused through excess leverage and trading as Derivatives.

Warren buffets call that for derivatives because derivatives are highly fluctuating and speculative instruments which can blow off the entire amount by adverse movements.

43. Too big to fail means Financial institution who are renowned and have good credibility in the market are not easy to fail as the government will come to the rescue.