Using the liquidity effect and income effect, explain the outcome on interest rates of a higher rate of growth of the money supply
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Using the liquidity effect and income effect, explain the outcome on interest rates of a higher rate of growth of the money supply
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- The pure time value of money is known as the: Multiple Choice liquidity effect. inflation factor. Fisher effect. term structure of interest rates. interest rate factor.Using the money market diagram, explain the effect Of this policy measure on the real interest rate.Consider the accompanying cash flow series at varying interest rates. What is the equivalent present worth of the cash flow series?
- Explain effect on compounding in respect to time value of money to general situations where compounding is induced by growth, inflation, or deflationBased on your understanding of the fAactors that affect the cost of money, Identify which of the following statement is true. a. higher inflation leads to lower interest rates. b. Interest is the price paid to borrow funds. c. Higher risk leads to lower interest rates.Which one of the theories states that “the rate of interest is set in the market for money balances”? Time-Preference Theory of Interest Liquidity Preference Theory Fisher’s Law Loanable Funds Theory of Interest Rates
- Illustrate with examples , that Interest rate is equivalent to the savings rate from the deposits?The discount rate used in a net present value analysis is the ________. A. rate of interest earned on a savings account B. rate of inflation C. rate of interest charged for debt financing of an investment D. required rate of return or the hurdle rateThe internal rate of return (IRR) is The same thing as the cost of capital. The discount rate that equates the present values of cash inflows and cash outflows. The same thing as the net present value. The same thing as the profitability index.
- Discuss the factors that influence interest rates, and why interest rates are so critical to economic growth or retraction.A financial analyst is treating a cash flow stream as a perpetuity. The present value of the perpetuity will __________ (increase, decrease, or not change) if the interest rate increases, and will ___________ (increase, decrease, or not change) if the growth rate increases.Is it correct to state that banks’ returns will be higher if interest rates increase? Outline the advantages and drawbacks of Gap analysis and Duration analysis.