Note: Read the given case and answer the given questions accordingly.

a.Analyze the role of "Money Market Instruments" in the 2007-08 financial crises. For facts and figures, utilize the given "excerpt: money market funds and 2008 financial crises".

b.What are 'Mortgage Based Securities (MBS)', show it through a diagram. How Sub-Prime MBS played its role in the 2008 financial crisis?

Excerpt: Money Market Funds and 2008 Financial Crises

Money market funds are mutual funds that invest in the short-term debt instruments that comprise the money mar ket. in 2013, these funds had investments totaling about $2.6 trillion. They are required to hold only short-maturity debt of the highest quality: The average maturity of their holdings must be maintained at less than 3 months. Their biggest investments tend to be in commercial paper, but they aiso hold sizable fractions of their portfolios in cer tificates of deposit, repurchase agreements, and Treasury securities. Because of this very conservative investment profile, money market funds typically experience extremely low price risk. investors for their part usually acquire checkw writing privileges with their funds and often use them as a close substitute for a bank account. This is feasible because the funds almost always maintain share value at $1.00 and pass aiong all investment earnings to their investors as interest. Until 2008, only one fund had "broken the hawk," that is, suffered losses large enough to force value per share below $1. But when Lehman Brothers led for bankruptcy protection on September 15, 2008, several funds that had invested heavily in its commercial paper suffered large losses. The next day, the Reserve Primary Fund, the oldest money market fund, broke the buck when its value per share fell to only $.97. The realization that money market funds were at risk in the credit crisis led to a wave of investor redemptions similar to a run on a bank. lElnly three days after the Lehman bank ruptcy, Putman's Prime Money Market Fund announced that it was liquidating due to heavy redemptions. Fearw ing further outows, the U.S. Treasury announced that it wouid make federal insurance available to money market funds willing to pay an insurance fee. This program would thus be similar to FDIC bank insurance. With the federal insurance in piace, the outflows were quelled. However, the turmoil in Wall Street's money market funds had already spilled over into "Main Street." Fearing further investor redemptions, money market funds had become afraid to commit funds even over short periods, and their demand for commercial paper had effectively dried up. Firms throughout the economy had come to depend on those markets as a major source of short term finance to fund expenditures ranging from salaries to inventories. Further breakdown in the money markets would have had an immediate crippling effect on the broad economy. To end the panic and stabilize the money mar kets, the federal government decided to guarantee invest- merits in money market funds. The guarantee did in fact calm investors and end the run, but it put the government on the hook for a potential liability of up to $3 trillionthe assets held in money market funds at the time. To prevent another occurrence of this crisis, the SEC later proposed that money market funds no longer be allowed to \"round off" value per share to 51, but instead be foroed to recognize daily changes in value. Alternav tively, funds wishing to maintain share value at $1 would be required to set aside reserves against potential invest- ment losses. But the mutual fund industry lobbied vehe~ merrtly against these reforms, arguing that their customers demanded sizable share prices and that the proposed capi tal requirements would be so costly that the industry would no longer be viable. In the face of this opposition, the SEC commissioners voted in 2012 against the reforms, but they were given new life when the Financial Stability Oversight Council weighed in to support them. It is still too early to predict the nal resolution of the debate