Explain money.

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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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19. (20 points in total) Suppose that the market demand curve is p = 80 - 8Qd, where p is the price per unit and Qd is the number of units demanded per week, and the market supply curve is p = 5+7Qs, where Q5 is the quantity supplied per week. a. b. C. d. e. Calculate the equilibrium price and quantity for a competitive market in which there is no market failure. Draw a diagram that includes the demand and supply curves, the values of the vertical- axis intercepts, and the competitive equilibrium quantity and price. Label the curves, axes and areas. Calculate both the marginal willingness to pay and the total willingness to pay for the equilibrium quantity. Calculate both the marginal cost of the equilibrium quantity and variable cost of producing the equilibrium quantity. Calculate the total surplus. How is the value of total surplus related to your calculations in parts c and d?

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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.