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- If the U.S. Treasury deposits income tax receipts into its account at the Federal Reserve, then a. the money multiplier will decrease b. the money multiplier will increase c. the monetary base will decrease d. the monetary base will increase Expected inflation can be estimated as a. the return on a TIPS bond b. the return on a Treasury bond c. the return on a TIPS bond minus the return on a Treasury bond d. the return on a Treasury bond minus the return on a TIPS bond A decrease in the expected return on stocks will a. shift the demand curve for bonds leftwards b. shift the demand curve for bonds rightwards c. shift the supply curve for bonds leftwards d. shift the supply curve for bonds rightwards Which of the following is part of M2? a. Small time deposits b. Money market mutual funds c. Currency held by foreigners d. All of the aboveyour professor has taught you that because municipal bonds (or any other tax-saving) bond would offer a tax saving on the interest income, the interest rate offered by such bonds may be even lower than the treasury bonds. while what your professor has told you is correct, imagine a situation where income tax rates are reduced. describe the effect of a reduction in income tax rates on the interest rates of municipal bonds? would interest rates on Treasury bonds be affected as well? how?The Federal Reserve decided to buy bonds in order to bring the economy back to full employment. This must mean that the Federal Reserve believes that the full employment level of output is a not enough information b below 1 million c exactly 1 million d above 1 million
- If the municipal bond rate is 6% and the corporate bond rate is 8%, what is the marginal tax rate, assuming investors are indifferent between the two bonds?Do you agree or disagree with the statement? Explain your answer. When the Treasury of the United States issues bonds and sells them to the public to finance the deficit, the money supply remains unchanged because every dollar of money taken in by the Treasury goes right back into circulation through government spending. This is not true when the Fed sells bonds to the public.If the cost of debt after tax for Sohar Textiles is 0.17 and its tax rate is 0.219 then what is the cost of debt? Select one: a. None of the options b. 0.2072 c. 0.2177 d. 0.1328 e. 0.1395
- All other things being equal, which of the following would cause interest rates to rise? a. The economy slides into a recession. b. The federal government's budget deficit declines. c. The rate of inflation decreases. d. The Federal Reserve contracts the money supply.2. Which of the following is a reason why zero-coupon bonds are the best way for high-income taxpayers to extract maximum value from tax-exempt state and local government bonds? a.The investments pay interest continually. b.The interest earned on the accumulated principal and interest is not tax-exempt. c.Zero-coupon bonds are high-risk, high-reward bonds. d.Zero-coupon bonds include more transaction fees. e.Zero-coupon bonds allow the investor to make additional tax-exempt investments.Assuming the government is selling a government bond to fight COVID-19, and at the same time, ASHANTI Goldfields Company is selling a corporate bond to increase its production. Under what conditions will the production-linked corporate bond be oversubscribed at the expense of the government bond. Explore all possible scenarios. [Not more than one-page]
- The federal budget deficit has been growing over the past several years. What impact will this fiscal change have on the supply of Treasury bonds? A. Bond supply does not change B. Bond supply increases C. Bond supply declinesWhich of the following statement is true? Interest rates on Municipal bonds are on average Question 24 options: lower than those of the U.S. government bonds with the same terms to maturity because municipal bonds are not as liquid as the U.S. government bonds . higher than those of the U.S. government bonds with the same terms to maturity because municipal bonds are not as risky as the U.S. government bonds . lower than those of the U.S. government bonds with the same terms to maturity because municipal bonds are not as risky as the U.S. government bonds . lower than those of the U.S. government bonds with the same terms to maturity because many local business prefers municipal bonds. higher than those of the U.S. government bonds with the same terms to maturity because municipal bonds are not as liquid as the U.S. government bonds .H10. Assume that initially, the risk premium, ρ = 0 and that the domestic and foreign interest rates are given by R = .06, R* = .05. Suppose that the risk premium depends linearly on the difference between domestic government debt, B, and domestic assets of the central bank, A, i.e., ρ = ρ (B-A) Find the new domestic interest rate if a sterilized purchase of foreign assets adjusts A s.t. (a) B - A = -.01/ ρ0 (b) B - A = .03/ ρ0
