5. Following Question 4, the demand curve and supply curve for bonds are estimated using thefollowing equations:-2Bd: Price =Quantity + 10005B°: Price = Quantity + 550c. What is the expected equilibrium price and quantity of bonds in this market?d. Given your answer to part (a), which is the expected interest rate in this market?

Given Bd P = -2/5 quantity + 1000 Bs P = quantity + 550

Answered: 5. Following Question 4, the demand…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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18. Assume that the Capital Asset Pricing Model (CAPM) holds. The risk-free interest rate is 3% and the market portfolio's expected return is 6%. Which beta will an asset with an expected return of 5% have? Group of answer options A) 0.67 B) 1.5 C) It is not possible to answer based on the information above D) 3
Briefly describe and explain the following investments terms; g) EAR h) Amortizing i) Bond valuation
d)Assume that all the information given previously is the same and the defaultrisk premium for corporate bonds rated AAA is 1.5 percent, whereas it is4 percent for corporate bonds rated B. Compute the interest rates onAAA- and B-rated corporate bonds with maturities equal to one year, twoyears, three years, four years, five years, 10 years, 20 years, and 30 years.
NEED HELP WITH ALL PARTS PLZZZZZ!!!
Everything else held constant, if the expected return on bonds falls from 10 to 5 percent and the expected relative return on GE stock rises from 7 to 8 percent, then the expected return of holding GE stock to bonds and the demand for GE stock falls; rises. rises; falls rises; rises. falls; falls
Refer to the figure below: +16 +12 +8 Consumption Investment is more volatile than consumption. -12 Investment 16 -20 -24 1 2 3 41 2000 2 3 4 1 2 3 4 1 2 3 41 2 3 41 2003 2 3 4 1 2 3 41 2 3 4 1 2 3 4 2007 2001 2002 2004 2005 2006 2008 CALENDAR QUARTER Instructions: Enter your responses as a percent rounded to the nearest whole number. What was the range, in absolute value of percentage change, of the variation in quarterly growth rates between 2001 Q1 and 2003 Q4 of a. Consumer spending? % b. Investment spending? % CHANGE FROM PRIOR QUARTER (porcent)
12 Inflationary expectations in the economy increase rapidly, evoking a much stronger response from issuers of bonds than borrowers of bonds. Using the model of supply and demand for bonds, illustrate and explain the impact of this increase in inflationary expectation on equilibrium bond price and interest rate.
Please answer fast please arjent help please ASAP pls answer fast please arjent
Why is the relationship between price and yield negative?a. Because investors reward higher cash-flows with a lower price.b. Because governments regulation prohibits a positive relationship.c. Because an increase in the yield discounts cash flows at a higher rate and so their netpresent value decreases.d. Because cash flows are variable over a bond’s life.
26
The demand D (in billions of £) for a bond with coupon rate 5% and face value FV = 1000, and two years to maturity as a function of its price P is D = 4000 − 2P. The supply in (billions of £)as a function of the price of the bond is S = 2P + 400. b) Suppose that the yield to maturity of the bond is i = 0.05. What is the quantity demanded/supplied at this interest rate? What happens to the demand/supply of the bond as the interest rate increases? Explain why. c) What is the equilibrium interest rate? d) Suppose that the bond trades at premium. Is there excess demand or supply? Explain. e) There is a business cycle contraction, so both supply and demand shifts. After the shift, the new demand curve is given by: D = 4000 + X − 2P , whereas the new supply curve is S = 2P + 200. For which values of X will the interest increase/decrease? Which values of X are in line with empirical data?
E3 The demand curve and supply curve for one-year discount bonds were estimated using the following equations: Bd Price=-2/5Quantity+990 Bs Price=Quantity+500 As the stock market continued to rise, the Federal Reserve felt the need to increase the interest rates. As a result, the new market interest rate increased to 19.65%, but the equilibrium quantity remained unchanged. What are the new demand and supply equations? Assume parallel shifts in the equations

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