Economics:
10th Edition
ISBN: 9781285859460
Author: BOYES, William
Publisher: Cengage Learning
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Question
Chapter 31, Problem 9E
To determine
To explain:
The effect on prices of bond when the stock prices are expected to increase by 10% and the cross-
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Consider demand for Apple stock. How is it affected by the following factors (relative to other assets)(Holding all other factors constant)
a. Wealth falls
b. Expected value appreciates
c. Liquidity for bond increases
d. Bond market: price volatily falls
Please provide explanation showing the shifts in the supply and demand curve for each of these factors.
What happens to interest rates in the market if the stock brokerage commission declines? Explain the reason for your answer!
Which of the following is NOT TRUE about bond valuation? *a. Bonds can sell either for a discount or premium.b. The value of the bond does not necessarily equal or the same as its price.c. Bonds pays its cash flows through periodic interest payments and principal.d. None of the choices.
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- The relationship between a bond and its price is easier to determine than the relationship between a stock and its price.True or Falsearrow_forwardStock prices fell throughout much of 2007 and 2008 and many investors decided to switch their funds into the bond market. What only about 30 percent of surveyed investors knew was that as bond prices rise, interest rates a. fall in reaction to the decreased demand for bonds. b. rise in reaction to the increased demand for bonds. c. fall in reaction to the increased demand for bonds. d. rise in reaction to the decreased demand for bonds.arrow_forwardWhich of the following is a difference between stocks and bonds? A. Stocks are issued for a fixed period; bonds are not.B. Stocks pay interest; bonds pay dividends.C. Bond payouts are more predictable than payouts from stocks.D. Bonds represent ownership; stocks represent debt.arrow_forward
- The National Pension Fund pays no taxes on its capital gains or on its dividend and interest income. Would it be illogical for it to have low-dividend, high growth stocks in its portfolio? Would it be illogical to have government bonds (which are safe but offer a low interest) in its portfolio?arrow_forwardA decrease in the expected return on stocks will a. shift the demand curve for bonds leftwards b. shift the demand curve for bonds rightwards c. shift the supply curve for bonds leftwards d. shift the supply curve for bonds rightwardsarrow_forwardEffects on shares and financial markets is a macroeconomic issue that was brought about by the impact of COVID-19. What government policy should be implemented to fix this issue?arrow_forward
- Which of the following is a reason why an investor would place a stop buy order on a stock? To ensure a short position is closed out for profit To ensure that the broker executes immediately at the current market price To ensure the stock is sold before its price falls to a specified level To ensure the stock is purchased when its price is risingarrow_forwardSuppose you expect a stock to pay a dividend of $10 every year forever and the discount rate is fixed at 5%. What would expect the price of that stock to be? What happens to the price of the stock if the discount rate falls to 2%? (Note: this exercise might help explain why the stock market is so high these days, despite the COVID-19 pandemic and lackluster economy.)arrow_forwardSuppose you observe that short-term interest rates are higher than long-term interest rates. a. What expectations must people have regarding future interest rates? b. Why might the above relationship signal a recession? Why might it not? c. What will the yield curve for this problem look like? Q4 Why is the fact that stock prices follow a random walk a signal of stock market efficiency? What would have to be true if stock prices did not follow a random walk?arrow_forward
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