Forces the move interest rates Please find the attached file including questions ( Course name: Financial Institutions and Markets ) Pleas answer them in
Forces the move interest rates Please find the attached file including questions ( Course name: Financial Institutions and Markets )
Pleas answer them in own words (No references or citation )
Note: Keep answers simple ( Not too long) 3-4 sentences is a good length.
For Question No. 6 try to go to the link of the game ( If you can do it please do and take a screen shot If cant its fine). 1. You own a $1,000-par zero-coupon bond that has five years of remaining maturity. You plan on
selling the bond in one year and believe that the required yield next year will have the following
probability distribution:
Probability
0.1
0.2
0.4
0.2
0.1
Required Yield (%)
6.60
6.75
7.00
7.20
7.45
a. What is your expected price when you sell the bond?
b. What is the standard deviation of the bond price?
2. Explain why you would be more or less willing to buy a share of Polaroid stock in the following
situations:
a. Your wealth falls.
b. You expect it (Polaroid stock) to appreciate in value.
c. The bond market becomes more liquid.
d. You expect gold to appreciate in value.
e. Prices in the bond market become more volatile.
3. An important way in which the Federal Reserve decreases the money supply is by selling bonds
to the public. Using a supply-and-demand analysis for bonds, show what effect this action has
on interest rates.
4. What effect will a sudden increase in the volatility of gold prices have on interest rates?
5. In the aftermath of the global financial crisis, U.S. government budget deficits increased
dramatically, yet interest rates on U.S. Treasury debt fell sharply and stayed low for many years.
Does this make sense? Why or why not?
6. Go to the website below and play the game until you are reappointed. Print out the certificate
and turn it in along with this assignment.http://www.frbsf.org/education/teacherresources/chair-federal-reserve-economy-simulation-game/
Purchase answer to see full
attachment
