The difference between investment schedule and investment demand curve.

Question

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Answer 1

Question

Chapter 29, Problem 1DQ

To determine

The difference between investment schedule and investment demand curve.

Expert Solution & Answer

Explanation of Solution

An investment schedule depicts the levels of investment made at different levels of gross domestic product (GDP). If the level of national income is higher, then the level of investment would be high and vice versa. It shows that there is a positive relationship which exists among GDP or the national income and investment.

Whereas, the investment demand curve shows the level of investment made at different levels of interest rate and expected return. If the expected return from the investment is greater, then the level of investment is higher and vice versa. Thus, there is a positive relationship between the investment demand and expected return.

If the interest rate is higher, then the cost of borrowing would be greater which in turn reduces the return from the investment. Thus, increasing interest leads to reduce the demand for investment and vice versa. There is a negative relationship exist among the demand for investment and interest rate.

Economics Concept Introduction

Concept Introduction:

Investment schedule: An investment schedule shows the level of demand for investment at different levels of national income.

Investment demand curve: The investment demand curve depicts the value of investment projects demanded at every given interest rate.

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Students have asked these similar questions

5. Some people find options expensive and use more complex structures to reduce the cost. For example, consider buying a call with a strike of $55 and selling a call with a strike of $60. a. What is the cost of establishing this combined position? b. What is the payoff of the combined position if the market price goes to $60? c. What is the payoff of the combined position if the market price goes to $100?

3. An investor has $1,000 to invest. They believe the price of the underlier will increase to $60 within one year. a. How many shares of stock could they buy with the $1,000 at the current price of $50, and how much would they make if the share price increased to $60? b. How many calls with a strike of $55 could they buy for the same $1,000, and how much would they make if the share price increased to $60? c. How much would they make (or lose) from the stock and from the calls if the share price declined to $40? 4. What is the premium on a call with a strike of $0.01? Why is the premium so close to the $50 share price?

1. We want to examine the comparative statics of the Black Scholes model. Complete the following table using the Excel model from class or another of your choice. Provide the call premium and the put premium for each scenario. Underlier Risk-free Scenario price rate Volatility Time to expiration Strike Call premium Put premium Baseline $50 5% 25% 1 year $55 Higher strike $50 5% 25% 1 year $60 Higher volatility $50 5% 40% 1 year $55 Higher risk free $50 8% 25% 1 year $55 More time $50 5% 25% 2 years $55 2. Look at the baseline scenario. a. What is the probability that the call is exercised in the baseline scenario? b. What is the probability that the put is exercised? c. Explain why the probabilities sum to 1.

Answer 2

Question

Chapter 29, Problem 1DQ

To determine

The difference between investment schedule and investment demand curve.

Expert Solution & Answer

Explanation of Solution

An investment schedule depicts the levels of investment made at different levels of gross domestic product (GDP). If the level of national income is higher, then the level of investment would be high and vice versa. It shows that there is a positive relationship which exists among GDP or the national income and investment.

Whereas, the investment demand curve shows the level of investment made at different levels of interest rate and expected return. If the expected return from the investment is greater, then the level of investment is higher and vice versa. Thus, there is a positive relationship between the investment demand and expected return.

If the interest rate is higher, then the cost of borrowing would be greater which in turn reduces the return from the investment. Thus, increasing interest leads to reduce the demand for investment and vice versa. There is a negative relationship exist among the demand for investment and interest rate.

Economics Concept Introduction

Concept Introduction:

Investment schedule: An investment schedule shows the level of demand for investment at different levels of national income.

Investment demand curve: The investment demand curve depicts the value of investment projects demanded at every given interest rate.

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Answer 3

Question

Chapter 29, Problem 1DQ

To determine

The difference between investment schedule and investment demand curve.

Expert Solution & Answer

Explanation of Solution

An investment schedule depicts the levels of investment made at different levels of gross domestic product (GDP). If the level of national income is higher, then the level of investment would be high and vice versa. It shows that there is a positive relationship which exists among GDP or the national income and investment.

Whereas, the investment demand curve shows the level of investment made at different levels of interest rate and expected return. If the expected return from the investment is greater, then the level of investment is higher and vice versa. Thus, there is a positive relationship between the investment demand and expected return.

If the interest rate is higher, then the cost of borrowing would be greater which in turn reduces the return from the investment. Thus, increasing interest leads to reduce the demand for investment and vice versa. There is a negative relationship exist among the demand for investment and interest rate.

Economics Concept Introduction

Concept Introduction:

Investment schedule: An investment schedule shows the level of demand for investment at different levels of national income.

Investment demand curve: The investment demand curve depicts the value of investment projects demanded at every given interest rate.

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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 29, Problem 1DQ

To determine

The difference between investment schedule and investment demand curve.

Expert Solution & Answer

Explanation of Solution

An investment schedule depicts the levels of investment made at different levels of gross domestic product (GDP). If the level of national income is higher, then the level of investment would be high and vice versa. It shows that there is a positive relationship which exists among GDP or the national income and investment.

Whereas, the investment demand curve shows the level of investment made at different levels of interest rate and expected return. If the expected return from the investment is greater, then the level of investment is higher and vice versa. Thus, there is a positive relationship between the investment demand and expected return.

If the interest rate is higher, then the cost of borrowing would be greater which in turn reduces the return from the investment. Thus, increasing interest leads to reduce the demand for investment and vice versa. There is a negative relationship exist among the demand for investment and interest rate.

Economics Concept Introduction

Concept Introduction:

Investment schedule: An investment schedule shows the level of demand for investment at different levels of national income.

Investment demand curve: The investment demand curve depicts the value of investment projects demanded at every given interest rate.

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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 29, Problem 1DQ

To determine

The difference between investment schedule and investment demand curve.

Expert Solution & Answer

Explanation of Solution

An investment schedule depicts the levels of investment made at different levels of gross domestic product (GDP). If the level of national income is higher, then the level of investment would be high and vice versa. It shows that there is a positive relationship which exists among GDP or the national income and investment.

Whereas, the investment demand curve shows the level of investment made at different levels of interest rate and expected return. If the expected return from the investment is greater, then the level of investment is higher and vice versa. Thus, there is a positive relationship between the investment demand and expected return.

If the interest rate is higher, then the cost of borrowing would be greater which in turn reduces the return from the investment. Thus, increasing interest leads to reduce the demand for investment and vice versa. There is a negative relationship exist among the demand for investment and interest rate.

Economics Concept Introduction

Concept Introduction:

Investment schedule: An investment schedule shows the level of demand for investment at different levels of national income.

Investment demand curve: The investment demand curve depicts the value of investment projects demanded at every given interest rate.

Answer 6

Chapter 29, Problem 1DQ

To determine

The difference between investment schedule and investment demand curve.

Expert Solution & Answer

Explanation of Solution

An investment schedule depicts the levels of investment made at different levels of gross domestic product (GDP). If the level of national income is higher, then the level of investment would be high and vice versa. It shows that there is a positive relationship which exists among GDP or the national income and investment.

Whereas, the investment demand curve shows the level of investment made at different levels of interest rate and expected return. If the expected return from the investment is greater, then the level of investment is higher and vice versa. Thus, there is a positive relationship between the investment demand and expected return.

If the interest rate is higher, then the cost of borrowing would be greater which in turn reduces the return from the investment. Thus, increasing interest leads to reduce the demand for investment and vice versa. There is a negative relationship exist among the demand for investment and interest rate.

Economics Concept Introduction

Concept Introduction:

Investment schedule: An investment schedule shows the level of demand for investment at different levels of national income.

Investment demand curve: The investment demand curve depicts the value of investment projects demanded at every given interest rate.

Answer 7

Chapter 29, Problem 1DQ

To determine

The difference between investment schedule and investment demand curve.

Answer 8

Expert Solution & Answer

Explanation of Solution

An investment schedule depicts the levels of investment made at different levels of gross domestic product (GDP). If the level of national income is higher, then the level of investment would be high and vice versa. It shows that there is a positive relationship which exists among GDP or the national income and investment.

Whereas, the investment demand curve shows the level of investment made at different levels of interest rate and expected return. If the expected return from the investment is greater, then the level of investment is higher and vice versa. Thus, there is a positive relationship between the investment demand and expected return.

If the interest rate is higher, then the cost of borrowing would be greater which in turn reduces the return from the investment. Thus, increasing interest leads to reduce the demand for investment and vice versa. There is a negative relationship exist among the demand for investment and interest rate.