Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 17, Problem 38P
Suppose Ford Motor Company issues a five year bond with a face value of
- What is the interest rate Ford is paying on the borrowed funds?
- Suppose the market interest rate rises from
value of the bond increase or decrease?
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Suppose Ford Motor Company issues bonds with a face value of $500 and an annual coupon payment of $20 What is the interest rate Ford is paying on the borrowed funds? The interest rate is percent
The price of a bond with no expiration date is originally $1,000 and has a fixed annual interest payment of $150. If the price of the bond then falls by $250, what will be the interest rate yield to a new buyer of the bond?
A bond has a Macaulay duration of
10.00
and is priced to yield
8.0%.
If interest rates go up so that the yield goes to
8.5%,
what will be the percentage change in the price of the bond? Now, if the yield on this bond goes down to
7.5%,
what will be the bond's percentage change in price? Comment on your findings.
If interest rates go up to
8.5%,
the percentage change in the price of the bond is
nothing%.
(Round to two decimal places.)
If interest rates go down to
7.5%,
the percentage change in the price of the bond is
nothing%.
(Round to two decimal places.)
Comment on your findings. (Select the best answer below.)
A.
As interest rates decrease, the price of the bond decreases. As interest rates increase, the price of the bond increases.
B.
As interest rates increase or decrease, the price of the bond will always increase.
C.
As interest rates increase or decrease, the price of the bond remains the same.
D.
As interest rates…
Chapter 17 Solutions
Principles of Economics 2e
Ch. 17 - Answer these three questions about early-stage...Ch. 17 - From a firms point of view, how is a bond similar...Ch. 17 - Calculate the equity each of these people has in...Ch. 17 - Which has a higher average return over time:...Ch. 17 - Investors sometimes fear that a high-risk...Ch. 17 - What is the total amount of interest from a 5,000...Ch. 17 - If you receive 500 in simple interest on a loan...Ch. 17 - You open a 5-year CD for 1,000 that pays 2...Ch. 17 - What are the- most common ways for start-up firms...Ch. 17 - Why can firms not just use their own profits for...
Ch. 17 - Why are banks more willing to lend to...Ch. 17 - What is a bond?Ch. 17 - What does a share of stock represent?Ch. 17 - When do firms receive money from a stock sale in...Ch. 17 - What is a dividend?Ch. 17 - What is a capital gain?Ch. 17 - What is the difference between a private company...Ch. 17 - How do the shareholders who own a company choose...Ch. 17 - Why are banks called financial intermediaries?Ch. 17 - Name several different kinds of bank account. How...Ch. 17 - Why are bonds somewhat risky to buy, even though...Ch. 17 - Why should a financial investor care about...Ch. 17 - What is a mutual fund?Ch. 17 - What is an index fund?Ch. 17 - How is buying a house to live in a type of...Ch. 17 - Why is it hand to forecast future movements in...Ch. 17 - What are the two key choices U.S. citizens need to...Ch. 17 - Is investing in housing always a very safe...Ch. 17 - If you owned a small firm that had become somewhat...Ch. 17 - Explain how a company can fail when the safeguards...Ch. 17 - What are some reasons why the investment strategy...Ch. 17 - Explain why a financial investor in stocks cannot...Ch. 17 - Explain what happens in an economy when the...Ch. 17 - You and your friend have opened an account on...Ch. 17 - How do bank failures cause the economy to go into...Ch. 17 - The Darkroom Windowshade Company has 100,000...Ch. 17 - Imagine that a local water company issued 10,000...Ch. 17 - Suppose Ford Motor Company issues a five year bond...Ch. 17 - How much money do you have to put into a bank...Ch. 17 - Many retirement funds charge an administrative fee...
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