1. Prior to the 2008 Financial Crisis, money market mutual funds had competed effective with traditional banks. Describe the market forces and regulation factors contributing to this development. (word count limit: 300)
2. Use the framework of the discount cash flow model to explain the housing bubble in the Unites States in the 2002-2006 period. (word count limit: 200)
3. Assume that the (expected) one-year interest rates over the next five years are 3%, 4%, 5%, 6%, and 7%. The interest rates on one- to five- year bonds are 3%, 4%, 5% and 8%. Determine the liquidity premium for a two-year, three-year, four-year, and five- year bond.