4. For commercial banks, what is meant by a managed liability? What role do liquidassets play on the balance sheet of commercial banks? What role do moneymarket instruments play in the asset and liability management of large globalbanks? In other words, how do banks manage unexpected changes in loans or core deposits? What roles do large CDs and eurodollars play? Liquid assets? Whathas happened to the eurodollar market during the recent financial turmoil?13. Describe the steps by which a change in the central bank’s policy interest rateaffect the array of short-term interest rates.Chapter 87. According to the Modigliani‐Miller Theorem, does it benefit a firm’s shareholderswhen more leverage is added to the fi rm’s financial structure? Why or why not?10. Why are junk bonds riskier than investment‐grade bonds? How do investors injunk bonds reduce their risk exposure?16. Why are the GSEs said to be characterized by moral hazard? Any evidence thatthis is a serious problem?Chapter 91. What is meant by unbundling? How might this lead to more economic efficiencyand less risk in the financial system? How do economies of scale fi t in?2. Why might investors be cautious about buying participations in a securitizedpool of loans? How is this related to adverse selection? How might they be assuredabout the underlying quality of assets in the pool?9. How can structured securities create value?
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