雷丁大学 Reading,硕士课程考卷.pdfVIP

You are allowed ten minutes before the start of the examination to acquaint yourself with the instructions below and to read the question paper. Do not write anything until the invigilator informs you that you may start the examination. You will be given five minutes at the end of the examination to complete the front of any answer books used. May/June 2008 ECM22 2007/08 A 001 Non-programmable calculators are permitted Programmable calculators without an alpha keypad are permitted Dictionaries are not permitted THE UNIVERSITY OF READING FINANCIAL MARKETS (ECM22) Two hours Answer ALL questions in Section A (worth a total of 75 marks), Answer ONE question from Section B (worth a total of 25 marks) Page 2 SECTION A Answer the following three (3) questions. Your answers should include brief, concise, and to the point explanations. All graphs must be clearly labelled. Make sure you read the entire question before answering individual parts. 1. Bonds and Yield Curves (20 marks total) In January, the Chancellor of the Exchequer announced plans by the government to bail out Northern Rock by issuing short term bonds to guarantee the financial status of the bank. The immediate result of this announcement was for Northern Rock’s share price to almost double that very same day. (a) (6 marks) Is the increase in the share price consistent with economic theory? Explain and illustrate your answer. (b) (6 marks) Suppose that the government issues a one-time, large quantity of short