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Question 3 Just before the collapse of the subprime mortgage market in 2007, the most important credit- rating agencies rated mortgage-backed securities with Aaa and
Question 3 Just before the collapse of the subprime mortgage market in 2007, the most important credit- rating agencies rated mortgage-backed securities with Aaa and AAA ratings. Explain how it was possible that a few months into 2008, the same securities had the lowest possible ratings. Should we always trust credit-rating agencies? Question 4 Predict what would happen to the risk premiums of municipal bonds if the federal government guarantees today that it will pay creditors if municipal governments default on their payments. Do you think that it will then make sense for municipal bonds to be exempt from income taxes
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