Explain why a flight to quality happened after the collapse of the sub.docx

Explain why a flight to quality happened after the collapse of the sub.docx

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1. Explain why a flight to quality happened after the collapse of the sub-prime market. 2. Distinguish between adverse selection and moral hazard and give an example of each in financial markets. 3. What makes long term bonds risker than short term bonds? 4. The default risk on corporate bonds increase from demand, to prices, to yield. Explain what happens to the spread when between corporate bonds and treasury bonds. 5. Identify and describe 3 factors that will cause a supply of bonds to shift one way or the other. i. Increase in business in activity because more business would want capital ii. Something in mortgage market, interest rates go up and people want to borrow money to buy new home (more home loans). They are doing that because they are expecting higher interest rates after. 6. What is the optimal investment strategy according to the efficient market hypothesis?
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