Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $950. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price Interest Yield, % $8,500 10 $10,500 $11,500 7.04 b. What generalization can you draw from the completed table? O Bond prices and interest rates are directly related. O There is insufficient data to make a generalization. O Bond prices and interest rates are inversely related. O Bond prices and interest rates are not related.

Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $950. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price Interest Yield, % $8,500 10 $10,500 $11,500 7.04 b. What generalization can you draw from the completed table? O Bond prices and interest rates are directly related. O There is insufficient data to make a generalization. O Bond prices and interest rates are inversely related. O Bond prices and interest rates are not related.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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A) List ALL the variables that influence the demand AND supply of bonds B) Given the 2 independent scenarios and the guided example posted draw the Supply and Demand bonds market and show the changes of Demand or Supply, quantity of bonds and price changes such as: a. If the government implement regulatory reforms that reduce regulatory costs for businesses. b. If the risk of the bond falls in relation to the riskiness of alternatives assets. (Instructions: To complete this question, you must follow the given instructions) 1) Develop your demand and supply curve on the same graph 2) Label the X and Y axis accordingly. 3) Show the shift in either the Supply and Demand curve 4) State the change in price and quantity of bonds
Q3. Suppose that the money demand function is given by: Md=$Y (.25-i), where $Y is $100. (a) Derive the bond demand function (B) assuming that wealth is $50. (b) Calculate Md and Bd at interest rates of 5% (use .05) and 10% (use .10). SHOW WORK. (c) How does an increase in the interest rate affect the amount of money people are willing to hold, according to your calculations? How does an increase in the interest rate affect the quantity of bonds people are willing to hold? (d) Suppose the supply of money is currently $20.. Show that the equilibrium interest rate is 5% (.05). (e) Suppose the central bank wants the equilibrium interest rate to rise to 15% (.15). At what level should it set monetary policy? SHOW WORK. What kind of monetary policy (expansionary or contractionary) does this imply?
Suppose a bond with no expiration date has a face value of $10,000 and annually pays a fixed amount of interest of $750. a. In the table provided below, calculate and enter either the interest rate that the bond would yield to a bond buyer at each of the bond prices listed or the bond price at each of the interest yields shown. Instructions: Enter your answers in the gray-shaded cells. For bond prices, round your answers to the nearest hundred dollars. For interest yields, round your answers to 2 decimal places. Bond Price $ 8,500 $ 10,500 $ 11,500 Interest Yield, % 7.89 5.56 b. What generalization can you draw from the completed table? O Bond prices and interest rates are not related. O There is insufficient data to make a generalization. O Bond prices and interest rates are directly related. O Bond prices and interest rates are inversely related.
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None
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