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NAME: 1
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Finance Homework
POINT/COUNTER-POINT:
Should Financial Institutions Invest in Junk Bonds?
POINT: Yes. Financial institutions have managers who are capable of weighing the risk against
the potential return. They can earn a significantly higher return when investing in junk bonds
than the return on Treasury bonds. Their shareholders benefit when they increase the return on
the portfolio.
COUNTER-POINT: No. The financial system is based on trust in financial institutions and
confidence that the financial institutions will survive. If financial institutions take excessive risk,
the entire financial system is at risk.
WHO IS CORRECT? Use the Internet to learn more about this issue and then formulate your own
opinion.
ANSWER:
The answer to the question is that both the point and counterpoint are correct. This is because
they do not state expressly the types of financial institutions that are involved. I...