Question: The design and function of financial instruments markets and institutions
The design and function of financial instruments, markets, and institutions aretied to the importance of information. Describe the role played by information in each of these three pieces of the financial system.
Answer to relevant QuestionsSuppose you need to take out a personal loan with a bank. Explain how you could be affected by problems in the interbank lending market such as those seen during the 2007-2009 financial crisis.Use Core Principle 3 from Chapter to suggest some ways in which the problems associated with the shadow banking sector during the 2007-2009 financial crisis might be mitigated in the future.Compute the present value of a $100 investment made 6months, 5 years, and 10years from now at 4 percent interest.Under what circumstances might you be willing to pay more than $1,000 for a coupon bond that matures in three years, has a coupon rate of 10 percent, and a face value of $1,000?If the current interest rate increases, what would you expect to happen to bond prices? Explain.
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