Question: Final assignment: Please explain how US government gets its finance, what is the relationship with the Federal Reserve, what instruments does the government use to

Final assignment:

Please explain how US government gets its finance, what is the relationship with the Federal Reserve, what instruments does the government use to transfer the money to the US citizens?

On 12/04/01 consider a fixed-coupon bond whose features are the following:

face value: $1,000

coupon rate: 8%

coupon frequency: semiannual

maturity: 05/06/04

What are the future cash flows delivered by this bond?

Discuss potential risk of the corporate bond vs government bond.

Why investors want to invest in negative government bonds? What is the origin of negative government bonds?

Does a greater risk imply a bad investment? Give me some examples.

What are the four main uses of interest-rate swaps?

What is a credit default-swap?

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