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- What is meant by the real risk-free rate of interest? Seleccione una: a. The nominal risk-free interest rate, less the expected inflation. b. The rate actually used in the market, not in textbooks. c. The rate quoted on short-term Treasury bills. d. The opportunity cost of foregoing consumption, representing the rate that must be offered to individuals to persuade them to save rather than consume.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.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.
- Why interest rate tends to increases before the crisis and then decline during the crisis? (refer to image)What effect would each of the following events likely have on the leavel of nominal interest rates? a. Households dramatically increase their savings rate. b. Corporations increase their demand for funds following an increase in investment opportunities. c. The govenment runs a larger-than-expected budget deficit. d. There is an increase in expected inflation.Suppose you believe that the economy is just entering a recession. Your firm must raisecapital immediately, and debt will be used. Should you borrow on a long-term or a shorttermbasis? Why?
- The central bank takes action that lowers interest rates dramatically. what is the effect of it to firm value? increase or decrease and why.Consider the following scenario analysis A. Is it reasonable to assume that treasury bonds will provide higher returns in recessions than in booms? B. Calculate the expected rate of return and standard deviation for each investment. C. What investment would you prefer?If interest rates in the economy are high, then a firm would use a MARR higher than current interest rates, and if interest rates are low, The MARR may be lower TRUE OR FALSE With explanation
- How is the market interest rate in the short-term and long-term financial market affected under the Pure Expectations theory when suppliers and users of loanable funds expect that interest rates will decrease the next year?The concept that market forces in the macroeconomy can remedy a recession is referred to as: Keynesianism: the use of expansive fiscal and monetary policies to resolve a recession. The self-correcting mechanism The consumption function The paradox of thriftWhen does the present economy studies do or use? a. When interest rate is not given b. When time is not given c. When time is not given but interest rate is given d. When time is given but interest rate is not given