MGEA06H3 Chapter : Week 8 chapter notes

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lavenderdonkey6

3 Dec 2010

School

UTSC

Department

Economics for Management Studies

Course

MGEA06H3

Professor

Iris Au

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MGEA06H3 Full Course Notes

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N when the bond"s mp = pv, there is no pressure for the price to change. N an increase in the riskiness of any bond leads to a decline in its expected present value and thus to a decline in the bond"s price; the lower bond price implies a higher bond yield. N there are three reasons why firms and households hold money: households and firms hold money in order to carry out transactions. Economists call this transactions demand for money: they are uncertain about when some expenditure will be necessary, and they hold money as a precaution to avoid the problems associated with missing a transaction. Economists call this the speculative demand for money. Increase in interest rate increases opportunity cost of holding money and leads to reduction in quantity of money demanded. quantity of money demanded. N monetary equilibrium a situation in which the demand for money equals the supply of money.

Related Questions

139.The present value of a future payment increases if the:
A) period between the present and the future increases.
B) future payment decreases.
C) interest rate decreases.
D) stock market falls

140. The present value of a future payment decreases if the:
A) period between the present and the future increases.
B) future payment increases.
C) interest rate decreases.
D) stock market rises.

141. The present value of future payments depends on:
A) the size of the payment.
B) the length of the time period.
C) the interest rate.
D) all of the above.

142. Given an interest rate of 3 percent, the present value of afuture payment of $2,080 to be paid in one year is:
A) $1,904.76
B) $2,000.00
C) $2,019.42
D) $2,080.00

1. How does an increase in interest rates affect the present value of a future payment?

2. How does an increase in the size of a future payment affect the present value of a future payment?

3. Two payments of $1,000 are to be made. One of them will be paid one year from today and the other will be paid two years from today. Which has the greater present value? Why?

crimsonsardine495

The money demand curve has a negative slope because:

A) lower interest rates cause households and firms to switch from money to financial assets.
B) lower interest rates cause households and firms to switch from financial assets to money.
C) lower interest rates cause households and firms to switch from money to stocks.
D) lower interest rates cause households and firms to switch from money to bonds.

purplekoala954

MGEA06H3 Chapter : Week 8 chapter notes

MGEA06H3 Full Course Notes

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