What is likely to happen to the interest rate on mortgage loans if the Federal Reserve does large amounts of open market purchases? Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. MP.12 Homework Unanswered Due Mar 17th, 11:59 PM a They will likely rise. b с d They will likely fall. They will not change. The change is unpredictable.
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- The financial system in Jamaica has been the subject of much attention since the news broke of the alleged fraud at Stocks and Securities Limited (SSL). The governor of the Bank of Jamaica (BOJ) has been fielding calls from concerned investors, international financial institutions, and even other regional regulators concerning the impact of this situation and the negative media reporting would have on the stability of the financial system in Jamaica and the Caribbean region.The governor would like to preserve confidence in the financial markets and institutions and has decided to embark on a series of educational “road-shows” where he will address targeted stakeholders such as the American Chamber of Commerce (AMCHAM), investor groups and the media.In this regard, the governor has assigned your team of senior professionals employed at the Bank of Jamaica to prepare a presentation slide deck for his address. Give an overview of the structure of the Jamaica financial systemThe role of…The Federal Reserve has raised the Federal Funds rate by 3.75 percent within the past year. Ifa bank had capital of 10 percent when the Fed began raising rates and has no loans at risk ofdefault, under what circumstances will its capital position be compromised? Please be specific.Goods Market: Money Market:C=50 + 0.8(Y-T) MS=490I=120-400r MD=.5y-100rG=110T=50 Suppose there is an increased risk in the financial markets. Show graphically what happens tor, Y, and P in the SR and LR using both IS/LM/FE and AD/AS. Suppose there is a huge drop in consumer confidence. Show graphically what happens to r, Y,and P in the SR and LR using both IS/LM/FE and AD/AS.
- Explain the micro factors and macro factors which affect the cost of money? What are the conclusions of Beta stability tests and Tests based on the slope of the SML? (hint: refer to Ch 25 in the textbook) Suppose Asset A has an expected return of 10 percent and a standard deviation of 20 percent. Asset B has an expected return of 16 percent and a standard deviation of 40 percent. If the correlation between A and B is 0.35, what are the expected return and standard deviation for a portfolio comprised of 40 percent Asset A and 60 percent Asset B? 1) Calculate what is called Beta, , from the table below (hint : use excel for calculation for beta) and then 2) make the equation with beta and intercept to calculate the expected return of i asset. (hint; use SML equation in Chapter 25 and rRF=5%, M =9% ) Year M i 1 16% 19% 2 -6% -11% 3 12% 17% 4 14% 19% Calculate the expected return of portfolio and standard deviation of portfolio…Based on economists’ forecasts and analysis, 1-year Treasury bill rates and liquidity premiums for the next four years are expected to be as follows: R1 = 1.75 % E(2r1) = 2.65 % L2 = 0.07 % E(3r1) = 3.05 % L3 = 0.09 % E(4r1) = 3.50 % L4 = 0.14 % Using the liquidity premium theory, determine the current (long-term) rates. (Do not round intermediate calculations. Round your answers to 2 decimal places.)The RBI has toned down its expectation of the stress that banks may face as a result of the Covid crisis, after initially cautioning that non-performing assets could nearly double due to the hit to economic activity. According to stress tests conducted by the RBI: The gross NPA ratio for the banking sector could rise to 9.8% by March 2022 under a baseline, as compared with 7.48% in March 2021. The baseline scenario used in the current stress tests in one where GDP growth for FY22 is at 9.5%. In January, the RBI had said the gross NPA ratio of banks could rise to 13.5% by Sept. 30, 2021 under the then assumed baseline scenario of 0% GDP growth in the second half of FY21. Under the medium stress scenario, where GDP growth is at 6.5%, the gross NPA ratio could rise to 10.36%. Under the severe stress scenario, where GDP growth is at 0.9%, the gross NPA ratio for the banking sector may rise to 11.22%. The outcome of models set by the RBI do not amount to forecasts, the regulator clarified…
- The RBI has toned down its expectation of the stress that banks may face as a result of the Covid crisis, after initially cautioning that non-performing assets could nearly double due to the hit to economic activity. According to stress tests conducted by the RBI: The gross NPA ratio for the banking sector could rise to 9.8% by March 2022 under a baseline, as compared with 7.48% in March 2021. The baseline scenario used in the current stress tests in one where GDP growth for FY22 is at 9.5%. In January, the RBI had said the gross NPA ratio of banks could rise to 13.5% by Sept. 30, 2021 under the then assumed baseline scenario of 0% GDP growth in the second half of FY21. Under the medium stress scenario, where GDP growth is at 6.5%, the gross NPA ratio could rise to 10.36%. Under the severe stress scenario, where GDP growth is at 0.9%, the gross NPA ratio for the banking sector may rise to 11.22%. The outcome of models set by the RBI do not amount to forecasts, the regulator clarified…"that lowering interest rates in the recessionary COVID-19 period is good policy because it will guarantee consumers will spend more as it is cheaper to borrow money" do you agree or disagree with this statement? provide two reasons why?Please explain the correct answer(s). An investor wants to be able to buy 4 percent 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 percent. Which statement(s) below is/are true? 1.I. 4 percent is the desired real risk-free interest rate. 2.II. 6 percent is the approximate nominal rate of interest required. 3.III. 2 percent is the expected inflation rate over the period. A) I only B) II only C) III only D) I and II only E) I, II, and III
- Following the COVID-19 pandemic, central banks have committed to keepingshort-term interest rates low to stimulate economies and financial markets, evenas the recovery gains traction. Discuss the implications of this commitment by thecentral-bank on a Takaful Operator’s investment performance and providerecommendations on how it should restructure its asset classes so to continuemeeting expected returns?Please answer the both questions I will give you Upvote 1) Why is a financial crisis likely to lead to a contraction in economic activity? a. None of the above are correct. b. Those that borrow funds to finance productive investment opportunities will have a greater opportunity to obtain financing. c. A disruption in the financial system diminishes the flow of funds from savers to borrowers. d. Disruptions in the financial system decreases asymmetric information, thereby decreasing the associated problems of adverse selection and moral hazard. 2) Suppose the Federal Reserve is selling $10 million of bonds to First National Bank. What is the impact on reserves and the monetary base? a. Reserves fall by $4 million and the Monetary Base falls by $4 million. b. Reserves rise by $2 million and the Monetary Base rises by $2 million. c. Reserves fall by $2 million and the Monetary Base rises by $2 million. d. Reserves fall by $2 million and the Monetary Base falls by $2 million.Explain why when the spread between government bonds rate and corporate bond rates of the same maturity widens, it is helpful in predicting a possible recession. (widening of the spread just means that the difference between corporate and government bonds increases)