Questions in Economics Question3 Which best describes risk for a company\'s bond

Question

Questions in Economics

Question3 Which best describes risk for a company's bonds versus its shares? Oa. Usually, a company's shares are less risky than its bonds b. Usually, a company's bonds and its shares are equally risky c. Usually, if a company defaults, it will pay its shares before it pays its bonds d. Usually, a company's bonds are less risky than its shares Question 4 Suppose C 70+ 0.8* Y. What is the multiplier (as a number, NOT a fraction)? Question 5 Which statement best illustrates a housing price bubble? Oa. Buying a house solely because you expect housing prices to keep going up b. The eistence of tax incentives to encourage property investment c. An increase in the number of houses purchased for rental purposes Od. Housing prices determined by using all available information rationally

Explanation / Answer

3) Option b is correct (Both are equally risky)

4) Multiplier = 1/ (1 - MPC) = 1/(1 - 0.80) = 5

5) Option a is correct (irrational investment in housing sector causing sharp rise in home prices)

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