Suppose you have the option to purchase for $955 a two-year old bond with a $1,000 face value and one year left that has a coupon rate of 8-percent, or, purchase a new one-year bond for $1,000. What should you do? O a. Purchase used bond because the real interest rate is higher than the new bond's real interest rate. O b. Purchase new bond because the real interest rate is higher than the used bond's real interest rate. Oc There is not enough information to determine the best investment option. O d. Purchase either bond because the real interest rate is the same for both options.

Suppose you have the option to purchase for $955 a two-year old bond with a $1,000 face value and one year left that has a coupon rate of 8-percent, or, purchase a new one-year bond for $1,000. What should you do? O a. Purchase used bond because the real interest rate is higher than the new bond's real interest rate. O b. Purchase new bond because the real interest rate is higher than the used bond's real interest rate. Oc There is not enough information to determine the best investment option. O d. Purchase either bond because the real interest rate is the same for both options.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

2
Suppose that the demand for loanable funds for car loans in the Milwaukee area is $12 million per month at an interest rate of 1O percent per year, $13 million at an interest rate of 9 percent per year, $14 million at an interest rate of 8 percent per year, and so on. If the supply of loanable funds is fixed at $18 million, what will be the equilibrium interest rate? Instructions: Enter your answer as a whole number. percent per year
A decrease in stock prices will the net wealth of households and consumption. O a. reduce; not change b. increase; decrease c. reduce; increase d. reduce; decrease e. increase; increase
Suppose instead Larry decides to buy 100 shares of NanoSpeck stock. Which of the following statements are correct? Check all that apply. O C The price of his shares will rise if NanoSpeck issues additional shares of stock. NanoSpeck earns revenue when Larry purchases 100 shares, even if he purchases them from an existing shareholder. Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Larry's shares to decline.
Suppose that the interest rate is 5 percent. Enter your answers rounded to 2 decimal places. A. What is the future value of $100 four years from now? $ How much of the future value is total interest? $ b. By how much would total interest be greater at an interest rate of 7 percent than at an interest rate of 5 percent? $
If Janet expects interest rates to rise in the near future, she will probably be willing to Select one: O a. maintain only the current holding of bonds. O b. O c. buy bonds now, and hold less money. put her money under her mattress rather than in a bank account. O d. buy bonds now, but only if their price falls. O e. sell bonds now, and hold more money.
Suppose that the demand for laonable funds for car in the Milwaukee area is $11million per month at an interest rate of 10 percent per year, $12million at an interest rate of 9 percent per year, $13million at an interest rate of 8 percent per year and so on. a. If the supply of loanable funds is fixed at $17million, what will be the equilibrium interest rate? b. If the government imposes a usury law and says that car loans cannot exceed 3 percent per year, how big will the monthly shortage (or excess demand) for car loans be? c. How big will the monthly shortage for car loans be if the usury limit is raised to 7 percent per year?
71
When the interest rate rises, bond values O a. fall. O b. will either increase or decrease depending on the type of bond. are unchanged because the interest rate paid on a bond is fixed. O d. rise.
A Company's stock currently pays a dividend of $5 dollars per year and you expect that dividend to grow by 3% every year, forever, such that next year you expect the dividend to be 5.15, to be 5.3045 the year after that, and so on. If your discount rate is 9%, a fair price for this stock today is_____.If your discount rate were to fall to 7%, holding all else the same, the fair price of the stock would increase to_________.