Hi, please help with the below. thanks!

Bond risk occurs when

The issuer of the bond is unable or unwilling to make interest and principle payments when promised.

Moody's issues a report on the company.

Interest rates change.

A and C happen.

The company pays down its sinking fund.

What is the biggest threat to the AAA bond rating of the United States?

That the US becomes entangled in a long war.

There is a bad economic downturn.

That the President is impeached.

That Congress refuses to raise the debt ceiling.

That one or more states default on their debt.

Debt issued by Southeastern Corporation currently yields 12%.A municipal bond of equal risk currently yields 8%.At what marginal tax rate would an investor be indifferent between the two bonds?

4%.

16%.

33%.

50%.

*20%.

Little Monsters Inc. borrowed $1,000,000 for two years from Northern Bank Inc. at an 11.5% interest rate.The current risk-free rate is 2% and Little Monsters' financial condition warrants a default risk premium of 3% and a liquidity risk premium of 2%.The maturity risk premium requires 0.5% per year and inflation is expected to be 3% next year.What does this information imply about the rate of inflation in the second year?

3%.

4%.

7%.

4%.

3.5%.

You observe the following market interest rates for both borrowing and lending:

The one-year rate = 5%.

The two-year rate = 6%.

The one-year rate one year from now = 7.25%.

How can you take advantage of these rates to earn a riskless profit?Assume that the expectation theory of interest rates holds.

You borrow at both the one-year and two-year rate and lend at the one-year rate one year from now.

You borrow at the two-year rate and lend at the one-year rate one year from now.

You lend at both the one-year rate and the one-year rate one year from now and borrow at the two-year rate.

You borrow at the one-year rate and lend at the two-year rate.

You borrow at the two-year rate and lend at the one-year rate one year from now.

The free-rider problem

Occurs when people who do not pay for information take advantage of the information other people have to pay for.

Suggests that the private sale of information will only be a partial solution to the lemons problem.

Prevents the private market from producing enough information to eliminate all the asymmetric information that leads to adverse selection.

All of the above.

The government regulates financial markets for two main reasons:

to ensure soundness of the financial system and to increase the information available to investors.

to improve control of monetary policy and to increase the information available to investors.

to ensure that financial intermediaries do not earn more than the normal rate of return and to improve control of monetary policy.

to ensure soundness of financial intermediaries and to prevent financial intermediaries from earning less than the normal rate of return.

Successful financial intermediaries have higher earnings on their investments because they are better equipped than individuals to screen out good from bad risks, thereby reducing losses due to

moral hazard.

adverse selection.

bad luck.

financial panics.