1. Assume the theory of absolute convergence is literally true. The current GDP per capita of Iran is $5000 and the current GDP per capita of Switzerland is $30000. What will happen to the difference between these two countries in the "long run"? 2. What has to be true of the capital account between two countries if the current account is negative? 3. Assume you are thinking about buying a three year bond with a face of $1000 and coupon rate of 5% (paid every year including at maturity, so you receive three coupon payments). What is your valuation of this asset if your discount rate is 10%? 5%?
1. Assume the theory of absolute convergence is literally true. The current GDP per capita of Iran is $5000 and the current GDP per capita of Switzerland is $30000. What will happen to the difference between these two countries in the "long run"? 2. What has to be true of the capital account between two countries if the current account is negative? 3. Assume you are thinking about buying a three year bond with a face of $1000 and coupon rate of 5% (paid every year including at maturity, so you receive three coupon payments). What is your valuation of this asset if your discount rate is 10%? 5%?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
1. Assume the theory of absolute convergence is literally true. The current
2. What has to be true of the capital account between two countries if the current account is negative?
3. Assume you are thinking about buying a three year bond with a face of $1000 and coupon rate of 5% (paid every year including at maturity, so you receive three coupon payments). What is your valuation of this asset if your discount rate is 10%? 5%?
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education