Question

Short Answer Questions: 1. What is the typical relationship among interest rates on three-month Treasury bills, long-term Treasury bonds, and Baa corporate bonds? 2. Why is a share of Microsoft common stock an asset for its owner and a liability for Microsoft? 3. If you suspect that a company will go bankrupt next year, which would you rather hold, bonds issued by the company or equities issued by the company? Why? 4. How can the adverse selection problem explain why you are more likely to make a loan to a family member than to a stranger? 5. Describe the two types of a secondary market. 6. Corporations receive funds when their stock is sold in the primary market. Why do corporations pay attention to what is happening to their stock in the secondary market? 7. Commercial banks, insurance companies, investment banks, and pension funds are all examples of financial intermediaries. For each of these, give an example of a source of their funds and an example of their use of funds.

Answer 1

Answerin o what is the physical relationship among interest grates on three month treatwry bills, long term foreascoy bonds and bac corporate bonids. As given. }. 3-month treasury bills 2. Long term treasuwy bonds 3. Baa Corporate bonde These 3 are define as below. ! "Three - month desixy billo: . These are nothing but the sheet tam investments for investers. And in this the interest rates are fluctuated and the debit obligation's are supported big government.

2. Long term treasury bonds.- → Long term fivestments for inwestos. In this the time period is more than loyears. → And the interest orates are fred. 3 Bea Crporate bond :- - These bonds are nothing but the which implies the trust of Coustmers to invest in particular bond. And this bond has not name of Baa Corporate bond. En this Baa. is nothing but the rating of bond by Credit agency. usually these bonds are high. we can say that in these three Baa. Corporate bond .. gives higher interest rate than other a. Note: As our cheag rules i can answer one question]