Explain the bet Robert Citron made with Orange County's funds and how it went bad
What will be an ideal response?
Robert Citron bet that interest rates would fall and the yield curve would remain upward sloping. As a result, he leveraged OCIP's position by borrowing short-term funds to acquire medium-term and long-term assets with fixed interest returns. When interest rates rose and the yield curve flattened, Citron incurred huge capital losses on his long-term investments and found his yield-curve returns dwindling.
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The government of Ugania had been extending huge amounts of loans to the business enterprises in the country. However, the borrowers failed to generate the profits necessary to repay their debts. As a result, national banks in Ugania had a lot of nonperforming assets on their books, and the Uganian currency was devalued. In this context, the business enterprises in Ugania are most likely to face which of the following type of risk?
A. Ethical B. Economic C. Technological D. Legal E. Sociological
In the perceptions of consumers, low prices tend to be associated with ________
A) low quality B) state -of-the-art technology C) fast ship times D) wide availability