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- Please explain the relationship between bond market and money market. Explain the process how an increase in the money supply by the Fed lowers the interest rate through the BOND MARKET to reach the new equilbrium interest rate. Explain the impact of increase in GDP on the interest rate.Using the demand and supply curves for bonds, explain the effect of the following on the interest rates. a. A business cycle contraction b. Low inflationary expectationWhich bond should have the highest interest rate? A. Low quality bonds B. Medium quality bonds C. High quality bonds Which of the following statements is NOT true? A. Stock owners benefit from stock price increases B. Common stocks are not securities C. Stock prices tend to be very volatile D. Higher stock prices allow companies access to more capital What is the expected impact of a decline in the money supply to the US economy? A. Lower aggregate prices (deflation) B. Higher aggregate prices (inflation) C. There is no general relationship between the money supply and inflaton Which of the following is NOT a component of federal fiscal policy? A. Federal tax revenues B. Federal government expenditures C. Federal budget deficit D. All of the above are components of federal fiscal policy A strong US dollar tends to A. Reduce exports to foreign…
- d. Now suppose that the supply of money is $1trn. Assume equilibrium in financial markets. Calculate the equilibrium interest rate. In equilibrium, money demand = money supply. $1.5 (0.8-2i) = $1 please show calculation step by stepWhat is the sequence of events from a rise in the federal funds rate target range to a change in the inflation rate? Other short-term interest rates _______. A. and the long-term interest rate rise the same day B. rise the same day, but it takes a few months for the supply of loanable funds to decrease C. rise within a few weeks, but the long-run interest rate rises almost immediately D. rise the same day, but it takes a few months for the supply of loanable funds to increaseNSo NS1 i4 Quanti Investi and Saving ($) I* I1 12 13 FIGURE 2 Refer to Figure 2. Suppose national saving is reflected by NSo and investment demand is reflected by IoP. Now suppose the government implements a policy that decreases tax on savings. What is the effect in the market for financial capital? Select one: Real Interest Rate
- 2. What effect a large federal budget deficit have on interest rates? Price B$ RD T Q. of Bonds 3. The president of the U.S. announces in a press conference that he will fight the higher inflation rate with a new antiinflation program. Predict what will happen to interest rates if the public believes him.What will happen in the bond market if the government imposes a limit on the amount of daily transactions? Which characteristic of an asset would be affected? How might it affect the interest rates. Explain with a graph. I want to see the answer to this question and steps. ThanksRate of Return 1. If a bond has a current yield of 6% and a rate of return of 2%, it has a capital gain or loss. 2. If a bond has a 2% rate of return and a capital loss of 4%, its current yield is ? Real and Nominal Interest Rates 3. If the nominal interest rate is 4% and expected inflation is -4%, the real interest rate is ? 4. If the nominal interest rate is 6%, the expected rate of inflation is 4% and the actual rate of inflation is 6%, the ex post real interest rate is ?
- Your 13-year old cousin comes to you again to ask more questions about the time value of money (TVM): “Hey cousin, I want to learn about annuities, growing annuities, perpetuities, and growing perpetuities. 1.Can you please explain what they are? 2.What are their differences? 3.Also, I wonder how all these TVM techniques can be used in real life. How are these techniques applied in finance? Can you provide examples?”Which of the following statements is correct regarding bonds? A. An increase in market interest rate would reduce a bond's yield. B. Bonds with high yields reflect high risk instruments. C. The equilibrium market price of a bond is always greater than the present value of that bond. D. A decrease in the market interest rate would result in a decrease in the present value of the bond. dont use chatgpt answerFind readings or videos on the internet with information on the factors that move the demand and supply curves of bonds, their effect on interest rates. Answer the following questions: 1. One way the Fed decreases the money supply is by selling bonds to the public. Using supply and demand analysis for bonds, show what effect this action has on interest rates. 2. Using the supply and demand of bonds, show why interest rates are pro-cyclical (they increase when the economy is expanding and decrease during recession). 3. What effect can a sudden increase in gold price volatility have on interest rates? 4. Using a supply and demand analysis for bonds, show the effect on interest rates when the risk of the bond increases.
