Suppose the Federal Reserve has set the money supply at $4 million. The table below shows the interest rate and total demand for money. Demand (in millions) Interest Rate 20% 15 10 5 0 $1 2 3 4 5 What is the equilibrium interest rate? Multiple Choice C O 10 percent 20 percent 5 percent O percent < Prev 6 of 25 Next > < # % & 8888886 $ @ 2 3 4 5 7
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- How much money do you have to put into a bank account that pays 10% interest compounded annually to have 10,000 in ten years?Interest rate 2% 4 6 8 C) 6 percent. D) 8 percent. 10 Transaction demand for money $220 220 220 220 220 Asset demand for money $300 280 260 240 220 1. Refer to the above table. The equilibrium interest rate is: B) 4 percent. Money supply $460 460 460 460 460 A) 2 percent.Question 15 Many credit card companies will let you determine your interest rate and your credit limit when they approve you for their card. True. False. Question 16 The interest rate a credit card company gives you when you first get your credit card can never be changed, even if your credit gets ruined and you don't make your credit card payments on time. True. False. Save and Quit Sign Your I should take any credit card I can get from a company regardless of terms and DELL %23 $4 % 7 8. 3. y e d g h a
- Use the figure below to answer the following question(s): Rate of Interest (%) O OG OC OH Sm3 OD 00 Smi 10 Sm2 D Q3 Q₁ Q₂ Quantity of Money -Dmz -Dm1 Refer to the above graph which shows the supply and demand for money where Dm1, Dm2, and Dm3 represent different demands for money and Sm1, Sm2, and Sm3 represent different levels of the money supply. The initial equilibrium point is A. What will be the new equilibrium point following an increase in the money supply? -Dm3 Jhay G12. Use the table below for the next set of questions. Column 1 shows the interest rate, column 2 shows the demand for money, and columns 3–5 show the supply of money. All quantities are in millions ($). (1) Interest rate (2) Dm (3) Sm1 (4) Sm2 (5) Sm3 10% $1500 $2200 $2500 $1800 8 1800 2200 2500 1800 6 2200 2200 2500 1800 4 2500 2200 2500 1800 2 2800 2200 2500 1800 (a)Given the demand for money, what will the equilibrium interest rate be for each of the different supply of money schedules? (b)Assume the economy was in equilibrium at Dm and Sm1. If the FED decides to change the money supply to Sm2 and the interest rate stays the same, how much of a shortage or surplus in the money supply will there be? Describe what will happen in…What is Money? What makes it useful? Explain its primary and derivative functions of Money? (1000 words)
- . A well-known bank has specialized in adjustable-rate mortgages. They have originated 7 billion USD in adjustable-rate mortgages. This bank generally raises money by borrowing with shorter term loans and issuing fixed-interest rate Certificates of Deposit. The bank has 6 billion in short-term adjustable-rate loans to partly help fund the loan portfolio. The federal reserve has announced an increase in their target interest rate of 50 basis points (0.5%). What is the equation and solution.A. Assume the interest rate in the bank is 6%. Should Apple Incorporated spend $10,000,000 to build a Research and Development facility that will yield $20 million in ten years? B. You will need $100,000 in seven years to buy a new car. How much money do you need to deposit in the bank now in order to have $100,000 seven years from now if the interest rate is 7%?An FI has purchased a $201 million cap of 8 percent at a premium of 0.70 percent of face value. A $201 million floor of 4.1 percent is also available at a premium of .75 percent of face value. a. If interest rates rise to 9 percent, what is the amount received by the FI? What are the net savings after deducting the premium? b. If the Fl also purchases a floor, what are the net savings if interest rates rise to 10 percent? What are the net savings if interest rates fall to 3.1 percent? (Negative amounts should be indicated by a minus sign.) c. If, instead, the Fl sells (writes) the floor, what are the net savings if interest rates rise to 10 percent? What if they fall to 3.1 percent? (Negative amounts should be indicated by a minus sign.) a. Amount received Net savings b. Net savings if interest rates rise to 10 percent Net savings if interest rates fall to 3.1 percent c. Net savings if interest rates rise to 10 percent Net savings if they fall to 3.1 percent
- Find readings or videos on the internet with information on the factors that move the demand and supply curves of bonds, their effect on interest rates. Answer the following questions: 1. One way the Fed decreases the money supply is by selling bonds to the public. Using supply and demand analysis for bonds, show what effect this action has on interest rates. 2. Using the supply and demand of bonds, show why interest rates are pro-cyclical (they increase when the economy is expanding and decrease during recession). 3. What effect can a sudden increase in gold price volatility have on interest rates? 4. Using a supply and demand analysis for bonds, show the effect on interest rates when the risk of the bond increases.4. Consider a money market in which there is an excess supply of money at the current interest rate. Then what likely to happen is the money supply curve will shift to the right until the demand for money equals the supply. the money demand curve will shift to the right, causing the price of bonds to increase, and the interest rate to fall, until the demand for money equals the supply. the corresponding excess supply for bonds will cause the price of bonds to increase, and the interest rate to fall, until the quantity demanded of money equals the quantity supplied of money. the corresponding excess demand for bonds will cause the price of bonds to increase, and the interest rate to fall, until the quantity demanded of money equals the quantity supplied of money. the money supply curve will shift to the left until the demand for money equals the supply.Assume the banking system contains the following amounts. Use this information to answer five questions. Total reserves $90 billion Transactions deposits $900 billion Cash held by public $100 billion Reserve requirement 0.10 Instructions: Enter your responses as a whole number. a. Are the banks fully utilizing their lending capacity? es O Yes O No b. What would happen to the money supply initially if the public deposited another $20 billion of cash in transactions a O No change O Decrease by $20 billion Increase by $20 billion O More information is needed
