Directions: Please answer each of the following questions in a paragraph for each. Explain your thoughts with theory and examples where applicable.
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For which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why.
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a U.S. government bond or a Brazilian government bond
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a U.S. government bond or a municipal bond with the same term and issued by a creditworthy municipality? -
a 6-month Treasury bill or a 20-year Treasury bond
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a Microsoft bond or a bond issued by a new recording company
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Identify each of the following acts as representing either saving or investment.
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Fred uses some of his income to buy government bonds.
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Julie takes some of her income and buys mutual funds.
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Alex purchases a new truck for his delivery business using borrowed funds.
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Elaine uses some of her income to buy stock in a major corporation.
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Henrietta hires a builder to construct a new building for her bicycle shop.
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Demonstrate that whether you would prefer to have $225 today or wait five years for $300 depends on the interest rate. Show your work.
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Write the rule of 70. Suppose that your great-great-grandmother put $50 in a savings account 100 years ago and the account is now worth $1,600. Use the rule of 70 to determine about what interest rate she earned.
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List three different ways that a risk-averse person can reduce financial risk.
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Following the recession of 2001, there was a month in which employment and the unemployment rate both rose. Assuming the computation were correct, how is it possible for both to have increased?
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Why might a favorable change in the economy, such as technological improvement or a decrease in the price of imported oil, be associated with an increase in frictional unemployment?
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What is the theory of efficiency wages? Provide four reasons that employers might pay efficiency
