金融市场习题培训教材.docVIP

1 Moral hazard: The risk that one party to a transaction will engage in behavior that is undesirable from the other party’s point of view. Yield to maturity: The interest rate that equates the present value of payments received from a credit market instrument with its value today. Option contracts: Contracts that give the purchaser the option to buy or sell the underlying financial instrument at a specified price, called the exercise price or strike price, within a specific period of time. Capital market: A financial market in which longer-term debt (maturity of greater than one year) and equity instruments are traded. If there is a decline in interest rates, which would you rather be holding, long-term bonds or short-term bonds? Why? Which type of bond has the greater interest-rate risk? You would rather be holding long-term bonds because their price would increase more than the price of the short-term bonds, giving them a higher return. What effect will a sudden increase in the volatility of gold prices have on interest rates? Interest rates would rise. A sudden increase in people’s expectations of future real estate prices raises the expected return on real estate relative to bonds, so the demand for bonds falls. The demand curve Bd shifts to the left, and the equilibrium interest rate rises. What characteristics define the money markets? The money markets can be characterized as having securities that trade in one year or less, are of large denomination, and are very liquid. Why are finance markets important to the health of the economy? Because they channel funds from those who do not have a productive use for them to those who do, thereby resulting in higher economic efficiency. When interest rate rise, how might businesses and consumers change their economic behavior? Businesses would cut investment spending because the cost of financing this spending is now higher, and consumers would be less likely to purchase a house or a car because the cost of financi