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bluesheep351Lv1
28 Sep 2019
WHAT IS THE NPV CALCULATION FOR PROBLEM BELOW:
During the Carter administration, long-term US Treasury yieldsexceeded 15%, and short-term T-Bills yielded near 20%. AfterReagan's inauguration, interest rates began to fall as Fed ChairmanVolcker's restrictive monetary policy succeeded in containinginflation. Over the past 25 years, US rates have steadily declined:T-Bills are hovering under 1% and the long bond is yielding about4%.
Lately, though, rising oil prices have incited inflationary forces.China and other developing nations have increased their consumptionfor oil, metals, materials, and food. Thus, both foreign anddomestic factors have spurred demand and are contributing to risingprices on a global scale. In addition to this commodity-inducedinflation, US consumers are faced with rising costs for essentialservices such as healthcare and education.
The Chairman of the Federal Reserve, Ben Bernanke, is faced with adilemma. Should the Fed increase rates to contain inflation; or,should the Fed keep rates very low to spur the US economy which isbeset by a collapse in home values, an extensive banking crisis,and a faltering stock market ?
WHAT IS THE NPV CALCULATION FOR PROBLEM BELOW:
During the Carter administration, long-term US Treasury yieldsexceeded 15%, and short-term T-Bills yielded near 20%. AfterReagan's inauguration, interest rates began to fall as Fed ChairmanVolcker's restrictive monetary policy succeeded in containinginflation. Over the past 25 years, US rates have steadily declined:T-Bills are hovering under 1% and the long bond is yielding about4%.
Lately, though, rising oil prices have incited inflationary forces.China and other developing nations have increased their consumptionfor oil, metals, materials, and food. Thus, both foreign anddomestic factors have spurred demand and are contributing to risingprices on a global scale. In addition to this commodity-inducedinflation, US consumers are faced with rising costs for essentialservices such as healthcare and education.
The Chairman of the Federal Reserve, Ben Bernanke, is faced with adilemma. Should the Fed increase rates to contain inflation; or,should the Fed keep rates very low to spur the US economy which isbeset by a collapse in home values, an extensive banking crisis,and a faltering stock market ?
During the Carter administration, long-term US Treasury yieldsexceeded 15%, and short-term T-Bills yielded near 20%. AfterReagan's inauguration, interest rates began to fall as Fed ChairmanVolcker's restrictive monetary policy succeeded in containinginflation. Over the past 25 years, US rates have steadily declined:T-Bills are hovering under 1% and the long bond is yielding about4%.
Lately, though, rising oil prices have incited inflationary forces.China and other developing nations have increased their consumptionfor oil, metals, materials, and food. Thus, both foreign anddomestic factors have spurred demand and are contributing to risingprices on a global scale. In addition to this commodity-inducedinflation, US consumers are faced with rising costs for essentialservices such as healthcare and education.
The Chairman of the Federal Reserve, Ben Bernanke, is faced with adilemma. Should the Fed increase rates to contain inflation; or,should the Fed keep rates very low to spur the US economy which isbeset by a collapse in home values, an extensive banking crisis,and a faltering stock market ?
Beverley SmithLv2
28 Sep 2019
