Suppose that a bond sells for $1000 and earns $50 of interest. So the interest rate is 5 percent. Now suppose that the interest rate rises to 10 percent, what would happen to the price of the bond? -- Select an Option -- Fall to $900 Fall to $500 Rise to $1100 Rise to $1050 C
Q: 17. Suppose the Canadian banking system jointly has $40 million in reserves, all banks have a target…
A: Given; Amount banks has as reserves= $40 millions Required reserve ratio= 8% Formula to calculate…
Q: The major determinant of a country’s income distribution is its distribution of productive and…
A: The distribution of income includes the way in which the total gross domestic product of a country…
Q: Margeʹs Hair Salon production function is Q = f(K, L) = K0.5L0.5 where K is the number of hair…
A: 2.1 Prove, with the aid of mathematics, the type of returns to scale exhibited by this production…
Q: Table 1: Price Data Year 2007 2008 Average Price Level $1.042 $1.13 In Table 1, what was the…
A: Answer; The inflation rate between 2007 and 2008 is 8.45%
Q: Price Quantity Demand 50 850 45 950 40 1000 30 1500 20 2000 10 2500 Solve for the elasticity of…
A: Answer; 1.05 is the correct answer
Q: Consider a hypothetical economy in which households spend $0.50 of each additional dollar they earn…
A: Given Marginal propensity to consume = 0.50 Marginal propensity to save = 0.50 Increase in…
Q: Refer to the graph shown. The equilibrium quantity for the monopolist represented is: MC Price $10…
A: A monopolistic has sole producer of a certain type of a good. So it has downward slope demand curve.
Q: 15. Consider the AD/AS model, and suppose that the economy begins at potential output. Through the…
A: Initially, the economy is at equilibrium A producing potential output Y* and the price level is P*.…
Q: A piece of equipment purchased at a cost $25 000 generated new income of $80,000 per year, witha…
A: Depreciation means a continuous fall in the value of an asset due to its use, wear and tear.
Q: The concept of market efficiency applies only in the financial market. True or False?
A: Market efficiency is the economic concept to describe the functioning of the market and its ability…
Q: When a firm has a natural monopoly, the firm's Omarginal cost curve must lie above the firm's…
A: a natural monopoly occurs when a firm enters with a very high start-up cost and high market power…
Q: Question b The output level on a AD/AS graph when all factors of production are being used is called…
A:
Q: Assume perfect competition: Price: $54 Cost: TC = 6Q + 0.03Q2 Solve for the profit-maximizing…
A: Perfect Competition's profit maximizing quantity is at P = MC
Q: D(x) is the price, in dollars per unit, that consumers are willing to pay for x units of an item,…
A: Introduction A solution that does not change with time is an equilibrium point of a dynamical system…
Q: A small open economy has demand for goat cheese given by P = 20 - 0.5Q and supply given by P = Q -…
A: Answer; Option (d) is correct
Q: If reserves are scarce, how would the federal funds rate change (increase or decrease) if the Fed:…
A: The term "federal funds" refers to excess reserves held by financial institutions over and above the…
Q: 3. Explain how each of the following will affect aggregate demand. In each case, draw a diagram to…
A: Hi! Thank you for the question, As per the honor code, we are allowed to answer three sub-parts at a…
Q: Demand for Corn Flakes is: P = 14 - Q. Supply of Kellogg's Corn Flakes is: P = 2 + Q. Now a generic…
A: Demand in economics refers to a customer's willingness and ability to purchase a product or…
Q: 5. Monopoly outcome versus competition outcome Consider the daily market for hot dogs in a small…
A: In a competitive market, profit is maximised at a point where price is equal to marginal cost. In a…
Q: D с D с 2,2 3, -1 -1, 3 0,0 Which of the following is FALSE for the grim trigger strategy and the…
A: We have 2×2 prisoners dilemma game. Where player are Trying to collude using the grim trigger…
Q: V 1st attempt Assume that people in the economy have adaptive expectations. If the inflation rate…
A: Unemployment rate: - it is the percentage of people out of the total labor force who are able and…
Q: If, using the same factors of production, France is able to produce more wine than England, France…
A: There are two countries France and England and one is producing more unit of a good using the same…
Q: Suppose the value of the S&P 500 stock index is currently 2,400. a. If the 1-year T-bill rate is 6%…
A: Answer;
Q: 9. In the game played in the class, "Guess 2/3 of the average", assume there are 3 students, each…
A: Introduction Each players names as integer between 0-100. Each player chooses best response to other…
Q: What is the theory of efficiency wages? Provide two reasons that employers might pay efficiency…
A: Theory of efficiency wages- The possibility of the efficiency wage theory is that rising wages can…
Q: A. Modified TRUE of FALSE. Write T if the statement is TRUE and CHANGE the underline word if the…
A: Storage is the process of keeping the goods, services, energy supplies to be used in future.
Q: Find the time required for an investment of 5000 dollars to grow to 8500 dollars at an interest rate…
A: As given information Present worth = 5000 Future worth = 8500 Interest rate = 7.5% per year…
Q: rtment store sells 184 units per mont certain large bath towel. The unit hase cost of a towel to the…
A: Economic Order Quantity, has one name Economic Purchase Quantity, here the order quantity that…
Q: A landlord who sells his property transfers the Odiversionary O reversionary subversionary…
A: A property transfer can be accomplished by the actions of two or more persons, or through the…
Q: Some critics argue that under the current deposit insurance regulations, neither insured depositors…
A: Deposit insurance is a form of insurance that protects depositors against losses in the event of a…
Q: Suppose Fantastic Films charges a single price for all tickets. Identify the monopoly outcome (PM,…
A:
Q: Do you think the criticism of Nike is fair, considering that the host countries are in dire needs of…
A: Nike's criticism, in my opinion, is unfair. Because although multinational corporations' main aim is…
Q: Suppose that the demand curve for wheat is Q=140-10p and the supply curve is Q = 10p. The government…
A: since you have asked multiple questions and according to policy we can solve only 1 question and for…
Q: Statement1: Domestic airlines are exempt from VAT on their transport of passengers Statement2:…
A: VAT, or Value Added Tax, is a government-imposed tax on the sale of goods and services to consumers.…
Q: Open market sales_reserves thereby____the money supply. 1) raise; raising 2) raise; lowering 3)…
A: A central bank's open market operation (OMO) is when it gives (or takes) liquidity through its…
Q: Firm D is a monopolist that faces a market with inverse demand given by: P = 120-4Q Where Q is Firm…
A: Answer;
Q: 6 A production function is given by f(x1,x2)=(max{x1,x2})^0.5. Prices of inputs are p1=10 and p2=20.…
A: Given perfect complement production function where inputs X1 and X2 has price 10 and 20…
Q: O P4 OP3 OP2 OP1 This firm will charge what amount? D Price a m Pat P3 + P2 P₁ 0 1 1 B 1 10 C 1 1 Q₁…
A: Profit maximization is the goal of every firm operating in the business.
Q: In 2021, the exchange rate between the Swedish Kronor (SK) and the $ dollar was E$/SK 0.07 $, while…
A: Introduction Exchange rate of different years and different countries have given. Change in exchange…
Q: PRICE LEVEL 130 110 70 50 AS 22 AD LRAS 20 24 26 30 OUTPUT (Trillions of dollars) Suppose that in…
A: If government decide to intervene to bring the economy back to the natural level of output by using…
Q: The initial investment in the equipment needed for the project is $50,000 for a duration of 10…
A:
Q: Complete the numbered boxes on the following table, by writing the word or words needed to…
A: Answer - Monetary Policies :- Monetary policies are the tools which is used by the central bank to…
Q: 1) With monopoly, we only specify long run cost functions because we are not as interested in the…
A:
Q: Officially recession is defined as: decrease in the real GDP for two consecutive quarters. decrease…
A:
Q: A tax law change that successfully encourages saving will interest rates, which leads to investment…
A: Equilibrium in the loanable funds market occurs at the intersection of demand and supply curves of…
Q: 1. How do both consumers and firms benefitted from the economies of scale? 2. Large business enjoys…
A: Answer - "Thank you for submitting the questions.But, we are authorized to solve one question at a…
Q: Caesars Entertainment (formerly Harrahis Entertainment) him feel valued as he gets a very special…
A: Customer relationship management (CRM) is a procedure that manages an organization's relationships…
Q: Question 25 In order list the following steps in the prosperity cycle in the order in which they…
A: 1. Employment Increases. This means more people are getting employed. They are getting jobs and work…
Q: less After the decrease in the price level, the quantity of money demanded at the initial interest…
A: Answer: If the price level has decreased then will be a downward movement along the aggregate demand…
Q: Suppose that capital and labour are perfect complements in a one-to-one ratio in a firm's production…
A: For creation of any good or service, we require inputs and such inputs are Known as factor of…
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
- The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate?The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, andtwo years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of£) as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantitydemanded/supplied at this interest rate? What happens to the demand/supply of the bond asthe interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain.e) There is a business cycle expansion, so both supply and demand shifts. After the shift, thenew demand curve is given by: D = 4000 + X − 2P, whereas the new supply curve is S =2P + 200. For which values of X will the interest increase/decrease? Which values of X arein line with empirical data?Bond A pays $8,000 in 20 years. Bond B pays $8,000in 40 years. (To keep things simple, assume that theseare zero-coupon bonds, meaning the $8,000 is theonly payment the bondholder receives.)a. If the interest rate is 3.5 percent, what is the valueof each bond today? Which bond is worth more?Why? (Hint: You can use a calculator, but the ruleof 70 should make the calculation easy.)b. If the interest rate increases to 7 percent, what isthe value of each bond? Which bond has a largerpercentage change in value?c. Based on the example above, complete the twoblanks in this sentence: “The value of a bond[rises/falls] when the interest rate increases,and bonds with a longer time to maturity are[more/less] sensitive to changes in the interestrate.”
- (a) You hold a consol that pays a coupon C in perpetuity. The current interest rate is i, and the average expectation in the market is that this will remain unchanged. What will be the price of the consol today? [1%] (b) In the next period however, the interest rate changes unexpectedly to i 0 . What is the new price of the bond? If the bond is sold at the beginning of that next period, what is the yield from the consol? Does the yield increase or decrease if i 0 > i? [4%] (c) Suppose alternatively that the market expects that the interest rate will change to i 0 after the initial period. What is the initial value of the consol, and what is the yield from selling it after one period? [5%]Problem 17-03 (algo) Suppose that a risk-free investment will make three future payments of $500 in 1 year, $500 in 2 years, and $500 in 3 years. Instructions: Round your answers to 2 decimal places. a. If the Federal Reserve has set the risk-free interest rate at 16 percent, what is the proper current price of this investment? $ b. What is the price of this investment if the Federal Reserve raises the risk-free interest rate to 18 percent? $The demand ? (in billions of £) for a bond with coupon rate 5% and face value ?? = 1000, and two years to maturity as a function of its price ? is ? = 4000 − 2?. The supply in (billions of £)asafunctionofthepriceofthebondis ? = 2?+ 400. There is a business cycle expansion, so both supply and demand shifts. After the shift, the new demand curve is given by: ?=4000+?−2? ,whereas the new supply curve is ?=2? + 200. For which values of ? will the interest increase/decrease? Which values of ? are in line with empirical data?
- Suppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. (a) What would you expect the price of the stock to be if it were priced according to its present value? (b) What happens to the price of the stock if the discount rate falls to 2%? (c) Now suppose you expect the dividend to grow by 1.5% every year, such that it will be $10.15 next vear. $10.30 the year after that, and so on. What are the new prices of the stock with 5% and 2% discount rates?A bond has a Macaulay duration of 10.00 and is priced to yield 8.0%. If interest rates go up so that the yield goes to 8.5%, what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to 7.5%, what will be the bond's percentage change in price? Comment on your findings. If interest rates go up to 8.5%, the percentage change in the price of the bond is nothing%. (Round to two decimal places.) If interest rates go down to 7.5%, the percentage change in the price of the bond is nothing%. (Round to two decimal places.) Comment on your findings. (Select the best answer below.) A. As interest rates decrease, the price of the bond decreases. As interest rates increase, the price of the bond increases. B. As interest rates increase or decrease, the price of the bond will always increase. C. As interest rates increase or decrease, the price of the bond remains the same. D. As interest rates…(1) Suppose you just bought a treasury bill for $965 that matures in three months (91 days), and has a face value of $1,000. What is your bond’s current discount yield? What is your bond’s current investment yield? ANS: (2) The French Government runs a budget surplus to finance its expenditure. Use the loanable funds model to show what happens to the interest rate, investments, and the quantity of loanable funds. ANS: (3) Which of the following is money? An American Express traveler’s check Checking deposits at Washington Mutual bank. The check you have just written to pay for school fees. ANS:
- Obtain weekly data from Refinitiv Eikon and plot the interest rates (bid and ask mid- rate) on 2-year commonwealth government bond (AU2Y-TBOND) and 10 yearcommonwealth government bond (au 10Y-TBOND) from January 2020. Determine theshape of the yield curve by using one of the interest rate theories you know and shareyour opinion on whether the Australian economy is heading for a boom or for arecession. Explain your choice.Over the next three years, the expected path of 1-year interest rate is 4, 1, and 1 percent. Today if you buy $1 of one-year bond and when it matures you use the money you receive to buy another one-year bond, then your expected rate of return for this $1 investment is ____% (round to the nearest integer). If the expectations theory of the term structure is true, then it implies that the current interest rate on 2-year bond must be ____% (round to one decimal place x.x)For each of the following pairs, which bond wouldyou expect to pay a higher interest rate? Explain.a. a bond of the U.S. government or a bond of anEastern European governmentb. a bond that repays the principal in year 2020 or abond that repays the principal in year 2040c. a bond from Coca-Cola or a bond from a softwarecompany you run in your garaged. a bond issued by the federal government or abond issued by New York State
