Hi, can anyone help explain the result of Q5(1)? Thanks.

While we often associate informal financial arrangements with poorer countries where financial systems are less developed, informal arrangements often coexist with even the most developed financial systems. What advantages might there be to engaging in informal arrangements rather than utilizing the formal financial sector? (LO1) If higher leverage is associated with greater risk, explain why the process of deleveraging (reducing leverage) can be destabilizing. (LO2) the Chicago Mercantile Exchange has announced the introduction of a financial instrument that is based on rainfall in the state of Illinois. the standard agreement states that for each inch of rain over and above the average rainfall for a particular month, the seller will pay the buyer $1000. Who could benefit from buying such a contract? Who. could selling If you wish to buy an annuity that makes monthly payments for as long as you live, describe what happens to the purchase price of the annuity if your age at the time of purchase goes up, (2) the size of the monthly payment rises, and (3) your health improves. (LO1) Which of the following would be more valuable to you: a portfolio of stocks that rises in value when your income rises or a portfolio of stocks that rises in value when your income falls? Why? (LO1) the Wall Street Journal has a daily listing of what are called "Money Rates" or interest rates on short-term securities. Locate it either in a recent issue of the newspaper by looking at the index on page 1 of the Money and Investing section, or in the Market Data Center of www.wsj.com. the most important money rates are the prime rate, the federal funds rate, and the Treasury bill rate. Describe each of these and report the current rate quoted in the paper. (LO1) Designated market makers, who historically have provided liquidity (i.e., have stood by ready to buy and sell) in markets for specific stocks, have declined in importance. Explain this decline in terms of technology and global economic integration. (LO2)