st! You can do it! Good luck! You have 60 minutes. E NOTE: You should take the exam in full screen, have a calculator, paper, and pencil handy. Turn off notifications. If you exit the rom full screen, switch tabs, and/or try to capture the screen, you will be blocked from taking the exam. Question 1 The central bank is selling $100 worth of bonds payable in one year. The price it gets today is $95. What is the implicit interest rate? (If you get 0.0112, please write 1.12) Typed numeric answer will be automatically saved. Question 2 Consider the following economy: (1) C=1000+0.3 (Y-T) (2) I = 800 (3) G = 500 (4) T = 400 Autonomous spending is:
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Step 1: The implicit interest rate can be calculated using the formula: Implicit interest rate = (Face value of bond - Price paid) / Price paid Show more…
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The central bank sells $100,000 worth of bonds in the open market to Chase, who withdraws cash from her checking account at the bank to pay the bonds. The required reserve ratio is 25% and no excess reserves. A. What is the amount by which Bank's liabilities change as a result of Chase's cash withdrawal? Explain. B. Calculate the change in required reserves for the Bank as a result of Chase's cash withdrawal. C. Have Chase's financial asset holdings increased, decreased, or stayed the same? D. Based on the central bank's open market sale of bonds, calculate the max amount by which the money supply can change throughout the banking system. E. How will the change in money supply in D affect unemployment and price level in the short run?
Akash M.
Today is 1/1/2022. The YTM (yield to maturity) for a 10-year treasury bond is 1.5%. You are an analyst at S bank and it is your job to determine the investment of the deposit the bank just received. One option is to invest $10 billion in 10-year treasury bonds. The bond face value is $1,000. The coupon rate is 2% and the coupon is paid twice a year, on 6/30 and 12/31. The maturity date for the 10-year treasury bond is 12/31/2031. 1. What is the price of the bond today? How many bond contracts ($1,000 each contract) can you purchase using the deposit of $10 billion? 2. The bank cannot afford to lose the value of their investment by 25% (bond value becomes less than $7.5 billion). At what market interest rate would the bond price lose 25% of its value? (2 pts)
The central bank buys $10,000 worth of bonds in the open market from Elaine, who deposits the proceeds in her checking account at MSM Bank. The required reserve ratio is 5%. (a) What is the amount by which MSM Bank's liabilities have changed? Explain. (b) Calculate the change in required reserves for MSM Bank. Show your work. (c) What is the dollar value of the maximum amount of new loans MSM Bank can initially make as a result of Elaine's deposit? Explain. (d) Based on the central bank's open-market purchase of bonds, calculate the maximum amount by which the money supply can change throughout the banking system. Show your work. (e) How will the change in the money supply in part (d) affect aggregate demand and the price level in the short run? Explain.
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