a. How do financial intermediaries help mitigate liquidity risk in the lending market?
b.What is the market reaction to default risk in the case of US T-Bills as opposed to junk bonds? Explain in terms of supply and demand?
c. How can Congress create risk in the bond market through the tax code?
d. How does a Secondary Market reduce risk in the marketplace?
e.What is the Interest Rate Parity Equation? (please provide the equation)
f. If interest rates in the US are lower than interest rates in Japan (similarly termed government bonds), what is the statement being made about the expectations of exchange rates during the term of the investment? Tell me if the expectation regarding the dollar is that it will appreciate or depreciate relative to the Yen.
g.How do financial intermediaries reduce transaction costs?
h.Given the idea of Moral Hazard and Adverse Selection, would an investor in Russia expect a higher or lower return on their investment in order to invest in Russia? Note—this question has a definite answer andyou need to draw on both moral hazard and adverse selection
A) How financial intermediaries help mitigate liquidity risk in the lending marketLiquidity risk is the risk that a given security or asset cannot be traded quickly enough in the market toprevent…