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- Under a credible system offixed nominal exchangerates...A.The Central Bank can adjustthe interest rate as it deemsappropriate for smoothingdomestic outputfluctuationsB.Domestic inflation will beapproximately equal to theinflation rate of the countryto which the domesticcurrency is peggedC.Public debt can bemonetised, i.e. viagovernment bonds boughtby the Central Bank againstnewly created moneyD.All of these optionsE.None of these options3. An investor wants to be able to buy 4% more goods and services in the future in order to induce her to invest today. During the investment period prices are expected to rise by 2%. Which statement(s) below is/are true? 1. 4% is the desired real rate of interestII. 6% is the approximate nominal rate of interest requiredIII. 2% is the expected inflation rate over the periodA. I onlyB. II onlyC. III onlyD. I and II onlyE. I, II, and III are trueIf the real discount rate is 7% and the inflation rate is 10%, Which of the follo ing interest rates ill be sed to find the present orth of a which of the following interest rates will be used to find the present worth of a series of cash flows that are in constant-worth dollars? a. 10.0% b. 17.7% c. 7.0% d. 10.7%.
- a) Assume that the nominal return on U.S. government T-bills was 10% during 2002, when the rate of inflation was 6%. The real risk-free rate of return on theseT-bills was: b) When individuals believe they have sufficient income and assets to cover their expenses while maintaining a reserve for uncertainties, they are most likely in the phase of the investment life cycle. gifting B. consolidation C. accumulation D. spending c) Find the duration of a 3-year bond with annual coupon payments of $80 and a par value of $1,000. The current market price of the bond is $950.25. If the YTM of the bond dropped by 1%, what would happen to the bond price?14. If the expected inflation rate is 5% and negotiators agree that the real wages should rise by 7%, the two sideswill agree to an increase in the money wage ofA 2%B 5 %C 7 %D 12%Supposethat on January 1 2009, the TL price of thedollar is 1.40 overtheyear, inflation rate in Turkey is 25 % and U.S. inflation rate is 10%. Iftheexchange rate is $1= 1.50 TL at theend of theyear, whichcurrencyappearto be overvalued.?Explain your answer.
- multiple choice questionsIf the expected inflation rate is 5% and negotiations agree that the real wages should be rise by 7%, the two sides will agree to an increase in the money wage of: a) 2%b)5%c)7% d)12%Assume the following: Spot USDBRL = 5.0500 1YR USD Money Market Rates = 1.50% 1YR BRL Money Market Rates = 9.00% What is the 6MO USDBRL forward rate? (Recall that Money Market Rates are quoted as annualized rates)The “prime” interest rate is the rate that bankscharge their best customers. Based on the nominalinterest rates and inflation rates in Table 19.10, inwhich of the years would it have been best to be alender? Based on the nominal interest rates and inflationrates in Table 19.10, in which of the years given wouldit have been best to be a borrower?
- Suppose that a country’s inflation rate increasessharply. What happens to the inflation tax on theholders of money? Why is wealth held in savingsaccounts not subject to a change in the inflationtax? Can you think of any way in which holders ofsavings accounts are hurt by the increase in inflation?1. You deposit $5000 in the bank for one year. CASE 1: inflation = 0%, nom. interest rate = 20% CASE 2: inflation = 10%, nom. interest rate = 30% a. In which case does the real value of your deposit grow the most? Assume the tax rate is 15%. b. In which case do you pay the most taxes? c. Compute the after-tax nominal interest rate, then subtract off inflation to get the after-tax real interest rate for both cases.Please no written by hand solutions After graduating from college in 2010, Art Major's starting salary is $ 40757.00 . Suppose Art Major has a cost of living adjustment (COLA) clause, or an escalator clause, in his labor contract so that he will be able to maintain this same level of purchasing power in real terms in 2011 and 2012. Using the information in the table, how much will Art Major earn in 2011 and 2012 if his salary keeps up with inflation? Round your answers to the nearest dollar. Year CPI 2010 103.77 2011 106.02 2012 108.04 What is Art Major's salary in 2011? $ What is Art Major's salary in 2012? $
