1. During the financial crisis of 2008, the prices of U.S. Treasury securities A) rose and...
1. During the financial crisis of 2008, the prices of U.S. Treasury securities
A) rose and the price of corporate bonds declined.
B) fell relative to the prices of corporate bonds.
C) remained in the same relative position to the prices of corporate bonds.
D) were frozen by order of the federal government.
2. Which combination of assets represents the most diversification?
A) holding corporate and Treasury bonds
B) holding shares of Google and Yahoo
C) holding shares of Google and Microsoft
D) holding shares of Google along with Treasury bonds
3.If the expected returns on stocks fall, while the expected returns on bonds do not change, then
A) the demand curve for bonds will shift to the left.
B) the supply curve for loanable funds will shift to the right.
C) the equilibrium interest rate on bonds will fall.
D) the equilibrium interest rate on bonds will rise.
Homework Answers
1. During the financial crisis of 2008 , the prices of U.S treasury securities rose and the price of corporate bonds declined. Hence, option(A) is correct.
2. Holding shares of Google along with treasury bonds represents the most diversification. Hence, option(D) is correct.
3. If expected returns on stocks will fall , while the expected returns on bonds do not change , then the equilibrium interest rate on bonds will fall. Hence, option(C) is correct.
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