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- How would you determine the interest rate that the bank charges on the transaction?Johanna is an institutional investor who is looking to “park” some of her investment funds for a short time. How would you explain to Johanna why money market instruments might be useful for her?Would usury laws help or hinder resolution of a shortage in financial markets?
- Why are bonds somewhat risky to buy, even though they make predetermined payments based on a fixed rate of interest?When I expect interest rates to fall in the near future, I will be willing to Buy bonds at current prices. Buy bonds, but only if their price falls. Sell bonds now. Put my money in savings account rather than buy bonds.Write the two types of interest rates used in equivalence calculation rates?