This question is about microeconomics analysis. Think of it as an answer to the test and answer it in 3-5 sentence long paragraph. 11. a) What determines the interest rate? b) What do financial institutions do? c) Explain the meaning of Arbitrage and Present Value.
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- qUESTION 1 Please help me figure out which of the following multiple choice questions are correct. Please tell me which choices are correct and which are wrongCompounding refers to: Select one: a. the increased value of an investment that arises from the payment of periodic interest. b. the process of earning interest on both the interest and the principal of an investment. c. the paying back of both interest and principal during the life of a fixed-payment loan. d. the calculation of interest rates after the compounding effect of taxes has been allowed for.5. Define financial system and then discuss the difference between financial markets and financial intermediaries. Medium answer
- SECTION E: ANSWER ONLY ONE QUESTION 1. "Economics and personal finance are intertwine". Outline and briefly discuss five reasons why to practice good financial management demands the understanding of economicsA well-functioning financial system does all of these EXCEPT: a. foster economic growth by directing savings to its most productive use. b. allocate risk among market participants. c. eliminate systematic risk through diversification. d. direct resources from savers to borrowers.One of the biggest problems for any economy is to figure out how to get or transfer money from people or firms who want to save (savers) to people or firms who want to borrow (investors). Explain how financial markets can help to solve this problem efficiently. Discuss how financial markets function and which tools they can offer to solve this problem. Discuss how financial systems are of crucial significance to adequate capital formation, which is indispensable to a speedy economic growth and development.
- Multiple Choice Questions 3. If the loan portfolio of a bank consists of a five-year, 10 percent annual coupon loan selling at par, what is the market, or economic, value of capital if interest rates increase by 1 percent? Securities (at par) Loans (at par) A. $35 million. B. -$155 million. C. $7 million. D. -$7 million. E. $0. $250 $760 Deposits Capital $975 $35Yasmeen purchased stock on January 30, 2017. If she wishes to achieve a long-term holding period, what is the first date that she can sell the stock as a long-term gain? a. July 31, 2017 b. July 30, 2017 c. February 1, 2018 d. January 20, 2018 e. January 31, 2018Which of the following explains the relevance of financial institutions? a. Financial institutions spur economic activity by providing credit for business expansion. b. Financial institutions create profits for depositors. c. Financial institutions allow governments to print money. d. Financial institutions provide the main source of funding for start-ups.
- #3. What is importance of financial markets for the productive capacity of the economy.?Question 1 a. What is the significance of a demand curve and a supply curve? b. Suppose $2,000 is borrowed at a simple interest rate of 8%. Calculate (i) the principal plus interest at the end of the 6th year? (ii) what will be the future value if the interest was compounded within the stated period? c. What is meant by the terms discounting and compounding? Why are these important in investment analysis? d. What is the difference between simple and compound interest? e. Compare the interest earned on $1,500 over: (i) 10 years at an interest rate of 8%, compounded yearly, and (ii) 10 years at an interest rate of 8%, compounded quarterly. f. Calculate the future value of the following investments. (1) $1,000 in 10 years at an interest rate of 8%, compounded annually. $15,000 in 8 years at an interest rate of 8%, compounded monthly. (ii)Which type of financial intermediary provides individual investors with professional management of their money and diversification in order to limit the risk of investing? A. mutual funds B. insurance companies C. hedge funds D. investment banks