Suppose an increase in demand in the market for mutual funds (a financial capital market) causes the interest rate to increase from 2% to 4%. How will this increase in demand affect supply and quantity supplied?
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- When frequency, asset specificity and uncertainty rise, what happens to the cost of using the market?Suppose you buy a house for $250,000. One year later, the market price for the house has fallen to $200,000. What is the return on your investment in the house if you made a down payment of 10 percent and took out a mortgage loan for the other 90 percent? Use the editor to format your answerIf a lender faces a potential loan applicant pool made up of equal amounts of low risks and high risks, will charging an average interest rate for all provide the average (expected) return? Explain.
- Would usury laws help or hinder resolution of a shortage in financial markets?Predict how each of the following economic changes will affect the equilibrium price and quantity in the financial market for home loans. Sketch a demand and supply diagram to support your answers. Because of a threat of war, people become uncertain about their economic future. The overall level of saving in the economy diminishes. The federal government changes its bank regulations in a way that makes it cheaper and easier for banks to make home loans.Can a financial market be complete and allow for arbitrage opportunities at the same time?
- The table below shows the market for credit cards at various interest rates in millions of dollars. What is the equilibrium interest rate? Interest Quantity of Financial Capital Supplied Quantity of Financial Capital Demanded Rate (Lending) ($ millions) (Borrowing) ($ millions) 9% $200 $275 10.5% $205 $255 12.0% $210 $235 13.5% $215 $215 15.0% $220 $195 16.5% $225 $175 Provide your answer below:What might cause interest rates to be low one year and high the next?What benefit do people get from the market forinsurance? What two problems impede the insurancemarket from working perfectly?
- Currently the Federal Reserve is gradually raising interest rates. What challenges come with doing that in an economically healthy way? If they were lowering rates, what challenges would come with that?Suppose there is an increase in the interest rate in the financial markets. What effect will this have on income? Use a diagram to support your answer.what are four different factors that would increase a bonds price, but not by interest rates or yields. I would like at least 2 from both the supply and demand side of the market.