Explain money.

Question

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Answer 1

Question

Chapter 11, Problem 1RQ

To determine

Explain money.

Expert Solution & Answer

Explanation of Solution

According to the trend, the principal amount of bond is $1,000, and the maturity period is 1 year, where if the current one-year interest rate is equal to the coupon rate in the financial market, then Person A will receive $1,000 for the bond. For instance, suppose the coupon rate and the current one-year rate both are 5% that is 50(5% of 1,000), then, the bond holder will receive total $1,050 (Prinicipal amount+coupon payment) after one year.

If the coupon rate is greater than the current year interest rate, then the value of bond is higher than $1,000 today. For instance, if the coupon rate is 7% and the current year interest rate is 6%, then bond holder will receive $1,070 in one year, where the worth of bond is $1,009 today (1,070/1.06). In the same way, if the coupon rate is less than the current interest rate, then the value of bond will be lesser than $1,000 today.

Economics Concept Introduction

Bond: A bond is a written and signed legal promise to repay a certain sum of money on a certain date.

Coupon rate: The coupon rate is the interest rate promised when a bond is issued.

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not use ai please

Not use ai please

Exercise 6 Imagine that you head production of a multinational food processing company. The ongoing uncer- tainty about costs means that you are unsure of the future cost of one of your inputs, x2. Your firm's production function is y = f(x1, x2) = x²x²² The output price p is 1000, x1 = 27, and wx₁ = 60. 1. Suppose the current input price is Wx2 = 50. Solve for the optimal choice of x2. 2. Now suppose that the probability the input price remains 50 is 0.65 and the probability that Wx2 60 is 0.35. Solve for the optimal choice of x2. Round down to the nearest integer. = 3. Finally, suppose the costs do actually rise, i.e., Wx2 = 60. Calculate the difference in profit from the uncertainty in (2) vs. the certainty in (1).

Answer 2

Question

Chapter 11, Problem 1RQ

To determine

Explain money.

Expert Solution & Answer

Explanation of Solution

According to the trend, the principal amount of bond is $1,000, and the maturity period is 1 year, where if the current one-year interest rate is equal to the coupon rate in the financial market, then Person A will receive $1,000 for the bond. For instance, suppose the coupon rate and the current one-year rate both are 5% that is 50(5% of 1,000), then, the bond holder will receive total $1,050 (Prinicipal amount+coupon payment) after one year.

If the coupon rate is greater than the current year interest rate, then the value of bond is higher than $1,000 today. For instance, if the coupon rate is 7% and the current year interest rate is 6%, then bond holder will receive $1,070 in one year, where the worth of bond is $1,009 today (1,070/1.06). In the same way, if the coupon rate is less than the current interest rate, then the value of bond will be lesser than $1,000 today.

Economics Concept Introduction

Bond: A bond is a written and signed legal promise to repay a certain sum of money on a certain date.

Coupon rate: The coupon rate is the interest rate promised when a bond is issued.

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Answer 3

Question

Chapter 11, Problem 1RQ

To determine

Explain money.

Expert Solution & Answer

Explanation of Solution

According to the trend, the principal amount of bond is $1,000, and the maturity period is 1 year, where if the current one-year interest rate is equal to the coupon rate in the financial market, then Person A will receive $1,000 for the bond. For instance, suppose the coupon rate and the current one-year rate both are 5% that is 50(5% of 1,000), then, the bond holder will receive total $1,050 (Prinicipal amount+coupon payment) after one year.

If the coupon rate is greater than the current year interest rate, then the value of bond is higher than $1,000 today. For instance, if the coupon rate is 7% and the current year interest rate is 6%, then bond holder will receive $1,070 in one year, where the worth of bond is $1,009 today (1,070/1.06). In the same way, if the coupon rate is less than the current interest rate, then the value of bond will be lesser than $1,000 today.

Economics Concept Introduction

Bond: A bond is a written and signed legal promise to repay a certain sum of money on a certain date.

Coupon rate: The coupon rate is the interest rate promised when a bond is issued.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 4

Question

Chapter 11, Problem 1RQ

To determine

Explain money.

Expert Solution & Answer

Explanation of Solution

According to the trend, the principal amount of bond is $1,000, and the maturity period is 1 year, where if the current one-year interest rate is equal to the coupon rate in the financial market, then Person A will receive $1,000 for the bond. For instance, suppose the coupon rate and the current one-year rate both are 5% that is 50(5% of 1,000), then, the bond holder will receive total $1,050 (Prinicipal amount+coupon payment) after one year.

If the coupon rate is greater than the current year interest rate, then the value of bond is higher than $1,000 today. For instance, if the coupon rate is 7% and the current year interest rate is 6%, then bond holder will receive $1,070 in one year, where the worth of bond is $1,009 today (1,070/1.06). In the same way, if the coupon rate is less than the current interest rate, then the value of bond will be lesser than $1,000 today.

Economics Concept Introduction

Bond: A bond is a written and signed legal promise to repay a certain sum of money on a certain date.

Coupon rate: The coupon rate is the interest rate promised when a bond is issued.

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Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Answer 5

Chapter 11, Problem 1RQ

To determine

Explain money.

Expert Solution & Answer

Explanation of Solution

According to the trend, the principal amount of bond is $1,000, and the maturity period is 1 year, where if the current one-year interest rate is equal to the coupon rate in the financial market, then Person A will receive $1,000 for the bond. For instance, suppose the coupon rate and the current one-year rate both are 5% that is 50(5% of 1,000), then, the bond holder will receive total $1,050 (Prinicipal amount+coupon payment) after one year.

If the coupon rate is greater than the current year interest rate, then the value of bond is higher than $1,000 today. For instance, if the coupon rate is 7% and the current year interest rate is 6%, then bond holder will receive $1,070 in one year, where the worth of bond is $1,009 today (1,070/1.06). In the same way, if the coupon rate is less than the current interest rate, then the value of bond will be lesser than $1,000 today.

Economics Concept Introduction

Bond: A bond is a written and signed legal promise to repay a certain sum of money on a certain date.

Coupon rate: The coupon rate is the interest rate promised when a bond is issued.

Answer 6

Chapter 11, Problem 1RQ

To determine

Explain money.

Expert Solution & Answer

Explanation of Solution

According to the trend, the principal amount of bond is $1,000, and the maturity period is 1 year, where if the current one-year interest rate is equal to the coupon rate in the financial market, then Person A will receive $1,000 for the bond. For instance, suppose the coupon rate and the current one-year rate both are 5% that is 50(5% of 1,000), then, the bond holder will receive total $1,050 (Prinicipal amount+coupon payment) after one year.

If the coupon rate is greater than the current year interest rate, then the value of bond is higher than $1,000 today. For instance, if the coupon rate is 7% and the current year interest rate is 6%, then bond holder will receive $1,070 in one year, where the worth of bond is $1,009 today (1,070/1.06). In the same way, if the coupon rate is less than the current interest rate, then the value of bond will be lesser than $1,000 today.

Economics Concept Introduction

Bond: A bond is a written and signed legal promise to repay a certain sum of money on a certain date.

Coupon rate: The coupon rate is the interest rate promised when a bond is issued.

Answer 7

Chapter 11, Problem 1RQ

To determine

Explain money.

Answer 8

Expert Solution & Answer

Explanation of Solution

According to the trend, the principal amount of bond is $1,000, and the maturity period is 1 year, where if the current one-year interest rate is equal to the coupon rate in the financial market, then Person A will receive $1,000 for the bond. For instance, suppose the coupon rate and the current one-year rate both are 5% that is 50(5% of 1,000), then, the bond holder will receive total $1,050 (Prinicipal amount+coupon payment) after one year.

If the coupon rate is greater than the current year interest rate, then the value of bond is higher than $1,000 today. For instance, if the coupon rate is 7% and the current year interest rate is 6%, then bond holder will receive $1,070 in one year, where the worth of bond is $1,009 today (1,070/1.06). In the same way, if the coupon rate is less than the current interest rate, then the value of bond will be lesser than $1,000 today.