Unformatted text preview: long-term bonds or short-term bonds? Why? Which type has the greater interest rate risk? 5. If mortgage rates rise from 5% to 10% but the expected rate of increase in housing prices rises from 2% to 9%, are people more or less likely to buy a house? 6. Interest rates were lower in the mid-1980s than they were in the mid-1970s, yet many economists have commented that real interest rates were actually much higher in the mid-1980s than in the mid-1970s. Does this make sense? Why were these economists correct? 1...
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- Summer '09
- Finance, $1,000, $1,100, $1,210, Banking Problem Set