Consumer income influence demand.
Income and demand for common commodities are tightly correlated, which means that as income rises, demand will follow suit and vice versa if income falls. For instance, most people consider consumer durables, technology, and leisure services to be standard goods. When it comes to inferior commodities, income and demand are inversely correlated, which means that as income rises, demand declines while income falls, and demand rises. For instance, basic items like bread and rice are frequently of lower quality. An inferior good is one whose demand decreases as wealth increases and vice versa.
In other words, the demand curve moves to the left as income rises.
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which of the following are possible effects on the accounting equation when recording a transaction that increases a liability by $100? (select all that apply.)
A shareholders' equity account decreases by $100.
An asset increases by $100.
What is accounting equation?
The accounting equation shows that the total assets of a company are financed by a combination of shareholder's equity and liabilities, in other words, total assets are the same as the sum of equity and liabilities
In this case, an increase in liability by $100, for instance by purchase on account, from the suppliers would increase liability and increase asset, inventory and can also decrease shareholder's equity if items are sold immediately, which requires an entry in costs of goods sold, which reduces stockholder's equity
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Full question:
which of the following are possible effects on the accounting equation when recording a transaction that increases a liability by $100? (select all that apply.)
Increase in equity
Increase liability
increase in assets
Increase in revenue
A bond is issued with a coupon of 4% paid annually, a maturity of 30 years, and a yield to maturity of 7%. What rate of return will be earned by an investor who purchases the bond for $627. 73 and holds it for 1 year if the bond’s yield to maturity at the end of the year is 8%?.
-11% is the rate of return will be earned by an investor who purchases the bond for $627. 73 and holds it for 1 year if the bond’s yield to maturity at the end of the year is 8%.
The key to answer this question is to remember that valuation of a bond depends basically of calculating the rate of return present value of a series of cash flows, so let´s think about a bond as if you were a lender so you will get interest by the money you lend (coupon) and at the end of n years you will get back the money you lend at the beginning (principal), so applying math we have the bond value given by:
so in this particular case that one year later there are 29 years to maturity so we have:
[tex]price= \frac{Principle*coupon}{(1+i)^{1} } +\frac{Principle*coupon}{(1+i)^{2} }+.......+\frac{Principle*coupon}{(1+i)^{n} }[/tex]
[tex]price= \frac{1000*0.04}{1+0.08} + \frac{1000*0.04}{(1+0.08)^{2} } +..........................\frac{1000*0.04)}{(1+0.08)^{30} }[/tex]
[tex]price=553.6638[/tex]
so as we have a higher rate of return the investment has the next return:
[tex]rate=\frac{553.68}{627.73} -1[/tex]
[tex]rate= -11.8[/tex]
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Trade:________
a. allows specialization, which increases costs.
b. reduces specialization, which reduces costs.
c. allows specialization, which reduces costs.
d. reduces specialization, which increases costs.
The correct option is C.
Trade allows specialization, which reduces costs.
We often hear about how trade makes us all better off because of the specialization that it creates. A country will concentrate on producing goods and services in which it has a comparative advantage, allowing it to gain a greater level of consumption than it would if it produced all goods and services at home.
A country can specialize in certain goods through trade. Doing so typically increases the cost of these goods because, since they are being produced by just one country, they can't be made cheaply and quickly.
However, this increased price lowers the prices for other goods that come from outside countries. It's a win-win situation! Increased costs for some products allow for lower prices for others; people have more choices when it comes to where their products come from.
They can also get more specialized items from only one country if they choose not to import them: They would be less likely to have any trouble with delivery and quality control.
Specialization is allowed by trade, which reduces costs. But When countries stop trading with each other, they start producing all of their own goods.
That means every single product must be manufactured at home. The process takes longer and makes everything more expensive--even though there is no extra shipping involved. The result? Even worse economic problems than before!
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Discuss why should the estimator review the plumbing portions of the project whether it involves single or separate contract. how should project risk affect the profit on a job?
The estimator should review the plumbing component since plumbing requires various items such as taps, pipes, and so on. These things come in many different variations and price ranges, therefore it is the estimator's task to review the quality of plumbing materials used in construction work.
There are various risks in construction work, and an estimator reserves a budget for risk. If the risk in any project is considerable, the estimator should increase the budget for risk. and if the estimator reduces the risk, the project will be lucrative.A competent estimator provides unbiased, effective, and consistent estimations. I'll explain what these phrases represent in this post. An estimator is a formula that takes our sample values and estimates the statistic.As the risks are identified ahead of time, risk management helps to improve the company's functioning and performance. The company will be prepared to deal with the threat. Thus, higher operational efficiency leads to increased production, which leads to increased firm profitability.Thus this is the meaning of estimator's review.
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fema 21. a right or obligation to act on behalf of a department, agency, or jurisdiction is defined as?
FEMA 21. a right or obligation to act on behalf of a department, agency, or jurisdiction is defined as Authority.
Authority can be used to guard our rights to lifestyles, liberty, and belongings. Authority may be used to offer order and protection in people's lives. as an instance, air visitor controllers prevent injuries and offer protection for airplane passengers. Authority can be used to control warfare peacefully and pretty.
In the fields of sociology and political technology, authority is the legitimate strength of someone or a group over different human beings. In a civil nation, authority is practiced in methods such as a judicial department or a govt branch of the presidency. inside the exercising of governance, the authority and electricity of the phrases are inaccurate synonyms.
Authority is a right or obligation to act on behalf of a department, agency, or jurisdiction. In most jurisdictions, the responsibility for the protection of the citizens rests with the chief elected official.
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regardless of whether you are looking through the microeconomics microscope or the macroeconomics telescope, the fundamental subject material of the interconnected
the fundamental subject material of the interconnected Economy does not change.
What is macroeconomics?
Macroeconomics is a branch of economics that focuses on how an economy as a whole functions, is set up, acts, and makes decisions. Controlling the growth and stability of an economy, for instance, by the use of interest rates, taxes, and government spending. This covers the regional, governmental, and global economy. According to economists Emi Nakamura and Jón Steinsson in a 2018 study, the economic "data addressing the repercussions of alternative macroeconomic strategies is still relatively imperfect and susceptible to serious criticism." Macroeconomists study topics such as the Gross Domestic Product (GDP), unemployment (including unemployment rates), national income, price indices, output, consumption, inflation, saving, investment, energy, international trade, and international finance.
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If you change the shutter speed on a video camera from 1/1000 to 1/2000, you would need to _____ in order to keep the same exposure.
If you change the shutter speed on a video camera from 1/1000 to 1/2000, you would need to ISO in order to keep the same exposure.
The amount of light entering the camera decreases as the shutter speed is increased because it opens and shuts more quickly. Similar to this, more light enters the camera when the shutter speed is slowed down.
The speed at which the shutter of a camera shuts is what is meant by the term "shutter speed." A slower shutter speed provides the photographer a longer exposure whereas a faster shutter speed results in a shorter exposure, which is the amount of light the camera captures.
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Given+a+4%+required+return,+what+is+a+$100+cash+flow+today,+a+$1,000+cash+flow+at+the+end+of+1+year,+and+a+$100,000+cash+flow+at+the+end+of+five+years,+worth+to+you+at+the+end+of+5+years?
The worth of $100 cash flow today, a cash flow of $1,000 at the end of 1 year, and a $100,000 cash flow at the end of 5 years will be $101,057.69
Given,
Required return = 4%
$100 cash flow today
Cash flow of $1,000 at the end of 1 year
$100,000 cash flow at the end of 5 years
Here, the future value of present cash flows will be calculated. This refers to the value of present cash flow in the future at a certain discounting rate.
The formula which is used to calculate future value is given below.
[tex]FV= \frac{PV}{(1 + r)^{n}}[/tex]
Here,
FV is the future value.
PV is the present value.
r is the rate of interest.
n is the number of years.
Thus, the FV of the cash flows will be:
[tex]FV = \frac{100}{(1+0.04)^{5}} + \frac{1000}{(1+0.04)^{4}} + 100,000[/tex]
[tex]= 96.1538 + 961.5384 + 100,000\\=$101,057.69[/tex]
Hence, a $100,000 cash flow at the end of five years will be $101,057.69
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during a sales presentation, ursula, the salesperson, is unable to understand what her customer means by his last statement. what should she do to verify her customer's intent?
During a sales presentation when the salesperson is unable to understand what her customer means by his last statement, she should restate the customer's comment to verify the customer's intent.
What is the significance of a customer's intent?A customer's intent can be referred to or considered as the actual or primary intention of the customer while purchasing a product, which can be understood through what he states. However, when the salesperson is unable to understand the intent, reverification of the same should be done by the way restating the comment made by him.
Therefore, the significance regarding a customer's intent has been aforementioned.
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A low ids level indicates that too much inventory is being held.
a. true
b. false
A low ids level indicates that too much inventory is being held. a. true
Inventory refers to all the items, goods, merchandise, and materials held by a business for selling in the market to earn a profit. Example: If a newspaper vendor uses a vehicle to deliver newspapers to the customers, only the newspaper will be considered inventory. The vehicle will be treated as an asset.
Inventory is an asset because a company invests money in it that it then converts into revenue when it sells the stock. Inventory that does not sell as quickly as expected may become a liability.
Inventory is a current asset account found on the balance sheet, consisting of all raw materials, work-in-progress, and finished goods that a company has accumulated.
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soomin is studying business and learning about the effects of the strong u.s. dollar. he has learned that the strength of a nation’s currency best relates to .
Positive Effects of a Strong Dollar
International Companies That Operate in the U.S. Benefit
Going Abroad Is More Affordable
Imports cost less
Bolstered Status as a World Reserve Currency
What do you understand by nation’s currency?A nation's official unit of exchange for buying goods and services is its national currency, which is a form of legal tender issued by the central bank or other monetary authority. The Federal Reserve controls the dollar, which is the main form of money in the United States.
The pursuit of national economic goals may be made simpler by the existence of a national currency. Additionally, it can be helpful in emergency situations and shields citizens from potential issues with being compelled to utilize foreign currencies. Inherent in sovereignty is it.
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the ropers are purchasing a home using va financing. the sales price of the home is $210,000. the crv comes in at $215,000. on what number will the va’s loan guarantee be based?
The answer is $210,000
The CRV comes at 215,000 but the actual price of the home is 210,000 and hence loan guarantee is given on 210,000 as the it is the actual price.
A VA loan could be a mortgage offered through a U.S. Department of Veterans Affairs program.
VA loans are available to active and veteran service personnel and their surviving spouses, and are backed by the centralized but issued through private lenders.
VA loans have generous terms, like no payment, no mortgage insurance, and no prepayment penalties.
This certificate of reasonable value helps when deciding and understanding the particular worth of the property to urge approval for a VA loan.
The US Department of Veteran Affairs has set the upper limit for VA Loans. Furthermore, to grasp and assess this property value, a Certificate of Reasonable Value is especially required.
With the assistance of this Certificate of Reasonable Value (CRV) for property, the veteran who is applying would be eligible to urge a VA loan to shop for the house.
The Certificate of Reasonable Value (CRV) for realty determines the most value of the property which you're buying and also helps to finalize the loan amount that has to be provided to the borrower.
The property evaluation is finished only by the US Department of Veterans Affairs.
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the trial balance is out of balance and the accountant suspects that a transposition or slide error has occurred. what will the accountant do to confirm this suspicion?
The trial balance does not seem to be in harmony, and the accountant has a sneaking suspicion that a slide or transposition mistake may be to blame.
Find out how much of a mistake there was, then divide that number by nine. If the result is split down the middle in a fair manner, then there is a good chance that this sort of mistake occurred.
This is further explained below.
What is a financial accountant?A general definition of an accountant is someone who works in the field of accounting or accountancy.
Accountants who have successfully passed the certification tests administered by their respective professional organizations are authorized to use designations such as
Chartered Accountant, Chartered Certified Accountant, Certified Public AccountantIn conclusion, Determine how many times there was a mistake, then take that amount and divide it by nine.
If the outcome is evenly divided down the middle in an equitable way, then there is a strong possibility that a mistake of this kind had a place.
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Shankman and allen's (2002) model of emotionally intelligent leadership suggests leaders must take into account these three fundamental facets of leadership: ______.
Shankman and Allen's (2002) model of emotionally intelligent leadership suggests leaders must take into account these three fundamental facets of leadership Context, self, and others.
Leadership intelligence relies to your ability to develop, learn and master new approaches to steer humans, and there are 3 tenets to do not forget while boosting it: self-cognizance, executive brain function, and reaction agility.
Being a successful leader method you want to be able to pay attention to others and soak up enter out of your group as properly. Shrewd leaders not most effective try to comprehend a way to get work executed however also recognize how others are inclined to strategize and plan as a result.
Two of the most critical leadership capabilities fall underneath intellect. We need leaders which could without difficulty realise challenging issues after which lead the attempt to resolve the problems and enact the ones answers. All this, whilst making difficult selections and constantly assessing the enemy's method.
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the december 31, year 4, balance sheet for deen company showed total stockholders’ equity of $156,000. total stockholders’ equity increased by $65,000 between december 31, year 4, and december 31, year 5. during year 5, deen company acquired $20,000 cash from the issue of common stock. the company paid a $5,000 cash dividend to the stockholders during year 5.
Net Income = $50,000
$65,000 (Year 2 Total Stockholders' Equity) = $20,000 ( Common Stock) + (Retained Earning) - $5,000 ( Dividend)
Define net incomeSales less cost of goods sold, selling, general and administrative costs, operating costs, depreciation, interest, taxes, and other expenses are used to compute net income (NI), also known as net earnings. For investors to gauge how much a company's revenue outpaces its costs, this figure is helpful. This figure, which is a measure of a company's profitability, can be seen on the income statement of a business.
A company's earnings per share is determined using net income. Net income is frequently referred to as the bottom line by business analysts since it appears at the end of the income statement. The term "profit attributable to shareholders" is how analysts in the UK refer to NI.
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at a sales volume of 25 units the average cost is $205 per unit and the variable cost is $5 per unit. assuming a linear cost behavior pattern, if sales double to 50 units the average cost will be:
At a sales volume of 25 units, the average cost is $205 per unit and the variable cost is $5 per unit. assuming a linear cost behavior pattern, if sales double to 50 units the average cost will be $ 105.
Common price or unit value is identical to the total value divided through the number of gadgets of a good produced the output average fee has robust implications for how corporations will pick out to rate their commodities. general cost divided with the aid of a quantity of output produced. also known as an average price. The sum of the fixed fee and the variable cost of producing an amount of output.
The corporation sold 72 gadgets within the first area. The weighted-average fee is the full inventory bought in the zone, $113, three hundred, divided by using the total stock counted from the zone a hundred, for a mean of $1,133 in keeping with the unit. The marginal cost represents the fee of producing one additional item. an according to-unit measure of fixed charges. average constant expenses fall as output rises because the identical total is unfolding over or divided through a bigger wide variety of units.
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What is one reason that a hotel owner might consider hiring a hotel management company?
Improved hotel management effectiveness is one reason that a hotel owner might consider hiring a hotel management company.
What function does a hotel management business serve?
The management firm oversees the hotel operations and makes sure they are profitable.They are in charge of every aspect of the business, from hiring and training employees to procuring supplies, cleaning rooms, renting out meeting space, and entertaining visitors.The General Manager is accountable to both the hotel management business AND the original owner who engaged the hotel management firm. The general manager's job is to manage the hotel in a way that generates income for the owner.To be clear, the hotel owner could be a person, a business, or a trust fund or real estate. These will change based on the market and the kind of hotel.To learn more about hotel management visit:https://brainly.com/question/10979252
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analia is a school district manager. here are some details about two schools in her district for the last school year: school a school b number of students 3000300030003000 4000400040004000 number of teachers 190190190190 380380380380 graduation rate 86�\��, percent 90�\��, percent budget per student $10,500\$10{,}500$10,500dollar sign, 10, comma, 500 $10,000\$10{,}000$10,000dollar sign, 10, comma, 000 % of students in sports club 62b\bb, percent 68h\hh, percent number of sports medals won 9999 7777 sat average 1200120012001200 1050105010501050 sat range (max-min) 900900900900 700700700700 analia wants to know which school has the higher sat average relative to the resources invested per student. 1) analia thought of two different ways to define this quantity. identify these two definitions among the following options.
Analia is a faculty district supervisor right here are some information about schools in her district for the remaining faculty 12 months.
District managers may have many obligations, but in preferred, their fundamental job is to direct and oversee all operational components inclusive of distribution, customer service, sales, marketing, human assets, and management in accordance with the financial institution's objectives.
This will be a demanding role as the travel and the need to continuously meet enterprise dreams and projections every so often make tough running conditions. District managers also are expected to paintings abnormal hours and be on name for emergency situations.
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an oil exploration company currently has two active projects, one in asia and the other in europe. let a be the event that the asian project is successful and b be the event that the european project is successful. suppose that a and b are independent events with p(a)
Exploration & production (E&P) is a specific sector within the oil exploration company and gas industry linked to the early stage of energy production, which generally involves searching for and extracting oil and gas. An E&P company finds and extracts the raw materials used in the energy business.
The problem deals with the concepts of the probability of events, such as the probability of complementary events, the probability of the union of events, the probability of the intersection of events, and the conditional probability of events.
Probability of Events
Compliment of Event and its probability:
For any event A, the complement of A is,
P(A)=1-P(A)
Union of events and its probability:
For andA2 be any two events, then
P(AUG)- P(4)+P(A)-P(ANA)
Here, ANĄ represents a set consisting of those elements which belong to both andA2, and AUA represents a set consisting of all those elements which belong to either orA2 or both.
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Assume the marginal propensity to consume is 0. 8. How will a decrease in taxes of $100 billion and a decrease in government spending of $100 billion affect aggregate demand?.
Aggregate demand will decrease by $900 billion.
The overall demand for finished goods and services in an economy at a certain period is known as aggregate demand (AD) or domestic final demand (DFD) in the field of macroeconomics. Effective demand is a common name for it, however other times this term is used to make a distinction. This is a country's demand for its gross domestic output. It details the volume of goods and services that will be bought at every price point. The aggregate demand is made up of investment, corporate and governmental expenditures, consumer spending, and net exports. Real output is represented on the horizontal axis and the price level is plotted on the vertical axis to represent the aggregate demand curve. Although it is presumed to be downward sloping, the Sonnenschein-Mantel-Debreu findings demonstrate that the curve's slope
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Investors assess cash flows before? reviewing business decisions buying and selling stock lending to a company
Investors consider cash flows before loaning to a company.
Why do investors check cash flow statements?Through tracking and analyzing cash inflows and outflows, it reports decision-making. The cash flow statement delivers a clear and expansive picture of the company's economic well-being by addressing the business's functional, financial, and investment-related movements.
How do you assess cash flow of a company?A cash flow analysis defines a company's working capital—the quantity of money available to run company operations and complete trades. An increase in inventory stock will occur as a negative amount in the cashflow account, implying a cash outlay, or that a firm has purchased more goods than it has sold.
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Answer: buying and selling stock
Explanation:
Perhaps the most universally useful strategy in capturing your reader's attention is to:________
Perhaps the most universally useful strategy in capturing your reader's attention is to state how your writing can meet the reader's needs. Hence, option D is correct.
What is meant by reader's attention?If a person's title caught their attention, the introductory paragraph must keep their interest. Knowing the issues that the readers have will make it easier for the people to address them in the headline and the first paragraphs.
The seeking attention is very necessary for the author to get known by the name, and it can only be possible if the writer introduce the things in the suspicious way.
Thus, option D is correct.
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The options are missing-
a. include terminologies and their explanations.
b. use as many illustrations as possible to describe your points.
c. begin the narration with a story.
d. state how your writing can meet the reader's needs.
e. be eloquent in word choice.
for large interest rate increases, duration the fall in security prices, and for large interest rate decreases, duration the rise in security prices.
For large interest rate increases, duration overpredicts the fall in the security's price, and for large interest rate decreases, duration underpredicts the rise in the security's prices.
What does duration do?The purpose of a bond duration calculation, is to find out how much the price of a bond is going to change when there is a change in interest rates. In other words, the duration shows the interest rate risk on a bond's price.
When interest rates that are larger increase, the duration acts in such a way that it overpredicts the fall in the price of the security. When larger interest rates decrease instead, the duration will tend to underpredicts the rise in the price of the security.
Options for this question include:
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which statement is not correct about the business-society interdependence? multiple choice business is a part of society. business is separated from the rest of society by clear boundaries. business activities impact other activities in society. actions by governments rarely affect business.
The actions by governments rarely affect the business is not correct about the business-society interdependence.
What is business-society interdependence?
The business-society interdependence means that the business and the society both are related to each other.
In this question, we have to identify the wrong statement about the business-society interdependence. There are four statements are given from which we have to choose the wrong statement. The statement fourth is not correct about the business-society interdependence because both the business and the government related to each other. Each decision of the government directly affects the company. Hence, fourth statement is correct.
Statement 1 is not correct because it is true about business-society interdependence.
Statement 2 is not correct because it is true about business-society interdependence.
Statement 3 is not correct because it is true about business-society interdependence.
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You are the ceo of a large scanner manufacturer. you just caught a department manager embezzling money from your company. the decision you make about whether to fire the department manager is a?
The correct answer is Programmed Decision
An Programmed decision is what?
To arrive at a solution or a conclusion, decisions that are made according to a plan or rule are referred to as programmed decisions. To put it another way, managers routinely and repetitively make decisions of this nature.
an automated choice. additionally known as a structured choice. is routine, repetitive, and done so in accordance with the organizational policies and guidelines. These guidelines and regulations have been set in place beforehand. to find solutions to the organization's persistent issues.
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In "thinking like an economist," the section "the role of economic theory" states that many economists believe that useful insights into our behavior can be gained by assuming that we act as if governed by the rules of___________ decision making.
In "thinking like an economist," the section "the role of economic theory" states that many economists believe that useful insights into our behavior can be gained by assuming that we act as if governed by the rules of Rational decision making.
Rational Decision making may be defined as the process of decision making which involves the use of logic in every step of decision making. It is based on the utilization of objective knowledge. The process of rational decision-making involves identifying the problem to be solved and then gathering all possible facts and figures.
The next step is analyzing all the possible solutions and the outcomes related to the solutions. The next step involves a decision making which is done by considering all the possible solutions and choosing the best one based on logic.
Examples of Rational decision-making are:
A student chooses what to pursue in his higher education.
A business decision on what to purchase for the organization.
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Angus bank holds no excess reserves but complies with the reserve requirement. the required reserves ratio is:__________
Angus Bank holds no excess reserves but complies with the reserve requirement. The required reserves ratio is 8%, and reserves are currently $25 million.
Excess reserves are capital reserves held through a financial institution or monetary group in extra of what's required through regulators, creditors, or inner controls. For business banks, extra reserves are measured towards trendy reserve requirement quantities set through critical banking authorities.
The Excess reserves is the minimal coins the financial institution can maintain on hand. The extra reserve is any coins over the desired minimal that the financial institution is maintaining in its vault as opposed to lending out to corporations and consumers.
Excess reserves are financial institution reserves held through a financial institution in extra of a reserve requirement for it set through a critical financial institution. In the United States, financial institution reserves for a business financial institution are represented through its coins holdings and any credit score stability in an account at its Federal Reserve Bank.
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The price of a good rises from $8 to $12, and the quantity demanded falls from 110 to 90 units. calculated with the midpoint method, the elasticity is?
The price of good rises from $8 to $12, and the quantity demanded falls from 110 to 90 units. calculated with the midpoint method, the elasticity is 1/5.
Elasticity measures the proportion trade of one financial variable in reaction to a percentage exchange in some other. If a terrific's charge elasticity of call for is -2, a 10% growth in price causes the amount demanded to fall 20%.
Elasticity, ability of a deformed fabric body to go back to its unique form and size when the forces inflicting the deformation are eliminated. A body with this potential is stated to act (or respond) elastically. Hooke's law.
Elasticity is the capability of an object or fabric to renew its regular shape after being stretched or compressed. instance: A rubber regains its form after lengthy stretch because of its elastic property.
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The real interest rate equals the nominal interest rate ________ the inflation rate.
The real interest rate equals the nominal interest rate minus the inflation rate.
An interest rate that has been prorated for inflation is referred to as a "real interest rate." The nominal interest rate is subtracted from the inflation rate to arrive at the real interest rate.
What is Nominal vs. Real Interest Rate?
When represented as a percentage of the total amount of a loan or investment, interest rates represent the cost of borrowing or the return on saving.A nominal interest rate is the sum of the real interest rate and the anticipated inflation rate.The actual return on a loan (to the lender) and on a bond is provided by a real interest rate (to the investor).Subtract the actual or anticipated rate of inflation from the nominal interest rate to determine the real interest rate.The nominal interest rate is the rate that banks, debt issuers, and investment firms advertise for loans and various investments. Real interest rates represent the purchasing power of investors. Nominal interest rates can indicate current market and economic conditions. The interest rate that banks, debt issuers, and investment companies promote for loans and different types of investments is known as the nominal interest rate.To know more about Nominal vs. Real Interest Rate visit:
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suppose that a commercial bank wants to buy treasury bills. these instruments pay $5 comma 000 in one year and are currently selling for $5 comma 01
Commercial banks purchasing treasury bills at 5,000 and selling at 5,001 per bill. The interest rate of those bills is calculated using Present Value formula which is Present Value = Future Value / (1+i)^n through which we get rate of interest as 2%
Calculation of the required bonds percentage
5000 = 5001/(1+i)
1+i = 5001/5000 = 1.0002
i = 1.0002-1 = 0.0002
i = r/100 = 0.0002
r = 0.002 or 2%
No it is not a typical situation. In normal times banks will not choose to pay more than the face value of a discount bond, since that implies negative yields to maturity
Treasury bonds/bills (sometimes known as T-bonds) are fixed-rate debt instruments issued by the government, with maturities ranging from 10 to 30 years.
T-bonds offer semi-annual interest payments up until maturity, when the owner is given the bond's face value.
Treasury bills are one of four practically risk-free government-issued securities, along with Treasury bonds, Treasury notes, and Treasury Inflation-Protected Securities (TIPS).
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The yield to maturity of these bonds is nothing%. (Round your response to two decimal places.)
Is this a typical situation?
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