Suppose a new website was launched providing up-to-date, credible information on all firms wishing to issue bonds. What would you expect to see happen to the overall level of interest rates in the bond market?
Answer to relevant QuestionsSuppose two types of firms wish to borrow in the bond market. Firms of type A are in good financial health and are relatively low risk. The appropriate premium over the risk-free rate for lending to these firms is 2 percent. ...Financial intermediation is not confined to bank lending but is also carried out by non-bank firms such as mutual fund companies. How do mutual funds help overcome information problems in financial markets?The rise of securities markets and the expansion of intermediation by nonbanks has come partly at the expense of commercial banks. Plot the ratio of bank credit (FRED code: TOTLL) to total credit market debt outstanding ...A bank with a two-year horizon has issued a one-year certificate of deposit for $50 million at an interest rate of 2 percent. With the proceeds, the bank has purchased a two-year Treasury note that pays 4 percent interest. ...Banks hold more liquid assets than do most businesses. Explain why.
Post your question