the price at which a 91-day Treasury Bill is sold falls, which of the following statements are true? ! - The Bill's discount rises 2-The Bill's yield rises 3 - The Bill's yeld fails 4 - The Bil's discount fails
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If the
! - The Bill's discount rises
2-The Bill's yield rises
3 - The Bill's yeld fails
4 - The Bil's discount fails
Step by step
Solved in 2 steps
- 1. When the yield curve is flat or downward-sloping, it suggest that the economy is more likely to enter a recession. Why? Explain your answer. 2. Using bond demand and supply analysis, explain how each of the following events wouldaffect the interest rates. Include correctly labeled diagrams in explaining your answers.a. Government budget surplusb. Decrease in volatility of stock pricesA9. Assuming that the expectations theory is the correct theory of the term structure, calculate the interest rates in the term structure for maturities of one to five years, and plot the resulting yield curves for the following paths of one- year interest rates over the next five years: a. 5%, 6%, 7%, 6%, 5% b. 5%, 4%, 3%, 4%, 5%. c. How would your yield curves change if people preferred shorter-term bonds over longer- term bonds?Why is the relationship between price and yield negative?a. Because investors reward higher cash-flows with a lower price.b. Because governments regulation prohibits a positive relationship.c. Because an increase in the yield discounts cash flows at a higher rate and so their netpresent value decreases.d. Because cash flows are variable over a bond’s life.
- Only 1 is wrong Which of the following information is wrong?A) The constant decrease in the general level of prices is called disinfection.B) The combination of inflation and recession is called slumpflation.C) If the Marginal Tendency of Saving increases, the slope of the Total Expenditure Line increases.D) In an open economy, the sum of Marginal Savings Tendency and Marginal Import Tendency is less than 1.E) A liquidity trap is called the situation where nobody demands bonds because the bond prices are maximum and everyone prefers to wait in money at the minimum interest rate.Explain why you would be more or less willing to buylong-term Delta Air Lines bonds under the followingcircumstances:a. The company just released its financial statements, indicating that income decreased and liabilities increased.b. You expect a bull market in stocks (stock prices areexpected to increase).c. You have analyzed your country’s monetary policyand expect interest rates to decrease.d. Brokerage commissions on bonds fall.e. Your income and wealth increased over the last two yearsBased on economics forecast and analysis, one year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows 5.65%, 6.75% 6.85% 7.15% respectively and the liquidity premium from 2nd year to 4th year is 0.05%, 0.10%, 0.12%. Using the liquidity premium theory, plot the current yield curve. Make sure you label the axes on the graph and identify the four annual rates on the curve both on the axes and on the yield curve itself.
- Yield curve: a) The US Treasury yield curve provides clues about the future direction of: 1) _________________, 2) _________________ and 3) __________________. b) In a couple of words, why is the US Yield Curve usually upward sloping? c) how is an “inverted curve” defined? d)An inverted yield curve is a reliable prediction of:If the price of a government bond (gilt) traded on the stock market rises above its nominal value, which of the following statement must be true? 1 -The bond's coupon falls below the yield 2 - The bond's coupon rises above the yield 3-the bond's yield rises above the coupon 4 - the bond's yield falls below the couponSince we only answer up to 3 sub-parts, we’ll answer the first 3. Please resubmit the question and specify the other subparts (up to 3) you’d like answered: Below is the Demand and Supply Curves for $250,000 bonds that mature in 18 years: Qd=400,000 - 2(P) Qs=3(P) - 100,000 1. The current market price of these bonds? ANSWERED PREVIOUSLY 2. The current equilibrium interest rate in that bond market? ANSWERED PREVIOUSLY 3. If the Federal Reserve wished to move the interest rate to 5%, would they need to buy or sell bonds? 4. In order to achieve the Fed's goal in #3, the bond price would need to change to what?
- (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: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? $According to the portfolio theroies of money deman , which of the following statement is true? an increase in the epected rate of inlfation increases the deman for money an increase in the real return of stock increases the demand of the money a decrease in wealth increase the deman for money a decrease in the real return on bonds increases the demand for money
