Question

Short Answers: Please answer the following questions in the space provided for each. 1. Would you be more or less willing to buy AT&T bonds under the following circumstances: (5 pts) a) Trading in these bonds increases, making them easier to sell. More willing: - Les willing: b) You expect a bull bear market in stocks (stocks prices are expected to rise). More willing: Les willing c) The gold market becomes more volatile. Les willing More willing: d) You expect interest rates to rise. Les willing: More willing: e) Trading in stocks becomes risky Les willing More willing: 2. Assume that Mary withdraws S1000 from her account at BankPlus. Using the appropriate T-accounts. show the effects of this withdrawal under the following conditions: (10 pts) a) A cash withdrawal of S1000: (Show BankPlus' T-Account) b) Assume that Mary writes a $1000 check from her BankPlus checking account and deposits it in her account at Trustmark, show the effects on both banks' T-accounts; Trustmark BankPlus

Answer 1

1.

a) More willing; because the bonds have become more liquid.

b) Less willing; as the prices of stock rises, investors will shift from bonds to equity.

c) More, because gold has become more risky.

d) less, because their expected return has fallen.

e) More willing.