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University of British Columbia
ECON 345
Geoffrey Newman

lMcaa TotQNTCAu Rex1li Department dfDtbntinfcs IJNIVERSITY COLIJMBIABRITISII OF 345ECON Midterm2006June G NewmanwlLlweNamestudentNo JJfLlast nanre firstTOTALPOINTS60 24 Section A Multiple Choice points x 15 36the Suppose earnings of an asset exc1ed fallFor are fo the foreseeable future givenTherr price the current asset yield its to maturiql must h c r i t1 t Xt 5rise aprar p If IaLFJr remain constanttr it t d change ambiguously y Suppose that th Suppose that th at sarne time at sarne time expected as expected as earnings fall above earnings fall above the Central Bank the Central Bank warns warns thatthat7S interest rates will likely have to rise predict in the near future We would that price the thisof 7t z asset would t L r Cotl t ll1 t P a definiretvrise f J tedefinirelyfatt could rise or fall4a fitIn the early stages ofthe boonr we w6uld expect that many firms would have expectedC4teamings than current reported eamings and that this would generate excessive volatility prices in the asset of E A G E R K E E N E RC O M yEutnnewergJess greaterestablishedi d less establishedwhich In phase ofthe stock rnarket cycle would you expect a central banker might be temptedraeclto lower interesl
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