Questions We Can Help You To Answer

Paper instructions:

Answer the above questions thoroughly in essay format using at least two sources. Include an APA formatted cover page. It should be double-spaced and include all appropriate citations of sources used.

1. When investment banks underwrite IPO’s they typically sell stock for 5-10 percent more than they pay for it. When they underwrite new stock for companies that are already public, the typical markup is 3 percent. What explains this difference? 
2. Suppose two people are the same age and have the same level of wealth. One has a high paying job and the other has a low paying job. Who should hold a higher fraction of his or her wealth in stock? Explain 
3. Suppose everyone in the world becomes convinced that the efficient markets hypothesis is true. Will it stay true? Explain
4. Would each of the following events increase or decrease the volume of bank loans? Explain
a. New regulations make it easier for share holders to replace company directors. 
b. A new law makes it a felony to default on a bank loan. 
c. All the economy’s small firms are bought by large firms. 
d. Mutual funds reduce their minimum balances for shareholders. 
5. In what ways is an asset price bubble similar to a Ponzi scheme? In what ways is a bubble different?
6. Some U.S. companies have 1 year terms for directors. The entire corporate board must run for election at each annual meeting. Other companies have 3 years terms; only a third of directors found that the companies with 3 years terms have lower stock prices, controlling for other factors. What might explain this finding?
7. Why do people commit each of the following crimes? Who is hurt by the crimes? Discuss who is hurt directly and also the border effects on the financial system. 
a. False accounting
b. Insider trading