Financial Instruments: Money and Bonds
please answer any 5 questions of your choice
.1. Briefly explain at least three functions of money.
2. Differentiate between “dollarization” and currency substitution.
3. Briefly explain at least two denominations of the money supply.
4. Using a discount bond, justify the statement “Bond prices and interest rates are inversely related, other things being equal.”
5. Explain any two of the factors that might change the supply of bonds.
6. Explain briefly the default risk premium of treasury bonds relative to corporate bonds.
7. Briefly explain the relationship between interest rate and inflation assuming the Fisher Effect.
8. Assuming the Pure Expectations Theory, explain the implications of an upward sloping yield curve and a downward sloping yield curve, respectively.
Answer preview
Financial Instruments: Money and Bonds
- Explain at least three functions of money
Money is very vital to the human race for three reasons. First, it acts as a tool that allows us to buy the items we require (Das, 2015). An individual with money can walk to any retail or wholesale where various products or services are being offered and purchase anything that pleases him. It provides an efficient way to satisfy…
(950 words)