1. Suppose you are in charge of the financial department of your company and you have to decide whether to borrow short or long term. Checking the news, you realize that the government is about to engage in a major infrastructure plan in the near future. Predict what will happen to interest rates. Will you advise borrowing short or long term? Explain

2.Explain why you would bemoreorlesswilling to buy a house under the following circumstances:

A) You just inherited $100,000.

B) Real estate commissions fall from 6% of the sales price to 5% of the sales price.

C) You expect Microsoft stock to double in value next year

D) Prices in the stock market become more volatile.

E) You expect housing prices to fall.

3. In 2008, as a financial crisis began to unfold in the United States, the FDIC raised the limit on insured losses to bank depositors from $100,000 per account to $250,000 per account. How would this help stabilize the financial system?

4. Why might you be willing to make a loan to your neighbor by putting funds in a savings account earning a 5% interest rate at the bank and having the bank lend her the funds at a 10% interest rate, rather than lend her the funds yourself?

5. Why would a life insurance company be concerned about the financial stability of major corporations or the health of the housing market?