All other things equal, if the demand for bonds increases, the price of bonds will will increase increase , and the quantity of money held for speculative purposes will interest rates decrease
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- . What are the various factors that affect the cost ofmoney and hence interest rates? How will changesin these components affect asset prices?The price of a bond O increases as interest rates in the financial sector increase O decreases as the price of precious commodities increase increases as interest rates in the financial sector decrease decrescos ar stock market values incroscoMr. Pierpont has wealthof $200,000. He wants to keep at least $80,000 in bonds at all times, and will shift $10,000 into bonds from his checking account for each percentage point that the interest rate on bonds exceeds the interest rate on his checkingaccount. Currently, he keeps $100,000 in bonds, which pay him 7%. What is the current interest rate on checking accounts?A) 5%B) 7%D) 10%C) 9%
- • Suppose that a person’s wealth is $50,000 and that her yearlyincome is $60,000. Also suppose that her money demand functionis given by Md = $Y10.35 - i2Derive the demand for bonds. Suppose the interest rate increases by 10 percentage points. What is the effect on her demand for bonds?What are the effects of an increase in income on her demand for money and her demand for bonds? Explain in wordsSuppose you are in charge of the financial departmentof your company and you have to decide whether toborrow short or long term. Checking the news, yourealize that the government is about to engage in amajor infrastructure plan in the near future. Predictwhat will happen to interest rates. Will you advise borrowing short or long term?Could you expnad on how you got the equilibrium interest rate value? i don't get 0.065 when is solve the euqation 900 = 50/(1+i) + 50/(i+1)^2 + 1000/(1+i)^2. Also, my answer from plugging into the equation i part a. to find the demand and supply at YTM = 0.05, doesn't match using the same equation to get the answer?
- How do higher commissions on bonds affect interest rates? O Increase interest rates. Unrelated to interest rates. O Decrease interest rates.If you are a banker and expect interest rates to rise inthe future, would you prefer to make short-term loansor long-term loans?Which of the following statements is true? Select one OA Ahigher level of income causes the demand for money at each interest rate to increase and the demand curve to shift to the left As the interest rate on bonds increases, the opportunity cost of holding money decreases. Oc the market for money is in equilbrium, then the bond market is in disequilibrum OD. A one-ime increase in the money supply will cause prices to rise and the interest rate will rise consequenity
- How should an increase in inflation affect the interest rate on an adjustable-rate mortgage?What are the major economic functions of the interest rate? How might the fact that many businesses fifinance their investment activities internally affect the effifi ciency with which the interest rate performs its functions?d. Now suppose that the supply of money is $1trn. Assume equilibrium in financial markets. Calculate the equilibrium interest rate. In equilibrium, money demand = money supply. $1.5 (0.8-2i) = $1 please show calculation step by step