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1. Consider a CDO made up of three made up of three identical mortgages of $1,000.00. Assume that the probability of any mortgage defaulting is p, all defaults are independent, and that the recovery rate is zero. Call the first to default tranche of the CDO L1, the second L2, etc. L1 bears the first $1,000.00 of losses, L2 the next $1,000.00, etc. For a security to be considered AAA, the probability of a total loss has to be less than 3%. What is the highest value for p that would still make Tranche L3 be rated AAA? a) 3%; b) 25% c) 21% d) 31% (Please show all work, no credit given for no work)
2. Which of these companies is not an NRSRO? a) Moody's; b) Goldman Sachs; c) Egan-Jones; d) Standard and Poor's
3. The majority of subprime mortgages were: a) issued by Fannie and Freddy; b) given to buyers with credit scores above 700; c) floating rate; d) transformed into Alt A as the housing prices fell
4. Over the last 40 years, housing prices have: a) risen more slowly than the stock market; b) received unfair tax treatment; c) benefited from eliminating the GSE's; d) grown more slowly in cities.
The United States makes up approximately 4% of the world population but generates more than 20% of its income. The most recent number is $52, 587 per person versus a world average of $10, 163. React to this as a Utilitarian, a Rawisian, and personall..
You are the manager of a firm that receives revenues of $60,000 per year from product X and $80,000 per year from product Y. The own price elasticity of demand for product X is -1.5, and the cross-price elasticity of demand between product Y and X is..
There is a 1 percent chance that you will have healthcare bills of $100,000, a 19 percent chance that you will have healthcare bills of $10,000, a 60 percent chance that you will have healthcare bills of $500, and a 20 percent chance that you will ha..
Compare two competing, mutually exclusive new machines that have only cost data given and tell which of the following statements is true regarding the present worth of the incremental investment at your investment interest rate. If it is greater than..
The demand and supply curves in the market for college education determine the equilibrium price and quantity of education. Assume the student for college education is given by Dstu = P = 9500 – 500Q, Assuming the market for education is private, wha..
Briefly explain in words how the “money multiplier” is supposed to work. As we discussed in class, the Fed has not used money supply targets as a basis for open market operations since the early 1980s. What does the Fed use as a target instead? What ..
If actual inflation is higher than expected? inflation, the
According to the article about the gasoline shortage, which way is the demand curve shifting
In considering the foreign trade issue, discuss the benefits and challenges between Americans and the cultures of the citizens of the various trading partner countries with which these trade agreements are made. Discuss the importance of your ability..
Burger King, the national franchise, is banned from opening a restaurant within 20 miles of Mattoon, Illinois. So, there is not a Burger King there; no problem, right? However, the national chain was able to keep the name Burger King, but the Hoots w..
The price elasticity of demand for gasoline is 0.5 and the price elasticity of supply for gasoline is 1.1. If demand rises by 25%, the price of gasoline will: The price elasticity of demand for wheat bread is 2.1 and the price elasticity of supply fo..
How do automatic stabilizers affect budget deficits and surpluses? How would automatic stabilizers be affected by an annually balanced budget rule? Why do automatic stabilizers minimize the lag problems with fiscal policy?
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