Answer:
b. demand-side market failure.
Explanation:
Demand-side market failure occurs when suppliers aren't able to charge consumers prices for goods and services.
I hope my answer helps you
Answer:
(a) $45
(b) 4.45%
(c) 1.41%
Explanation:
a) Dollar return:
= Selling Price - Buying Price + Coupon
= $985 - $1,010 + $70
= $45
b) Rate of return:
= Dollar return ÷ Buy price
= 45 ÷ 1,010
= 4.45%
c) Based on Fisher relation,
(1 + Nominal rate) = (1 + Real rate) × (1 + Inflation)
(1 + 4.45%) = (1 + Real rate) × (1 + 3%)
Therefore,
Real rate = 1.41%
Answer:
D) Monetary, fiscal
Explanation:
The Fed's dual mandate is to first promote a strong economy, but at the same time it must promote maximum employment, stable prices and moderate long term interest rates.
Monetary policy is carried out by the Fed through open market operations where it purchases or sells US securities, decreasing or increasing interest rates, and increasing or decreasing the money supply.
But if the interest rates are near 0, then the actions of the Fed are very limited regarding an expansionary monetary supply that would boost the economy and lower unemployment. There is basically no more room for lowering the interest rates.
So that means that the government must modify its fiscal policy to try to boost the economy. The government can either by increase spending, decrease taxes or a mixture of both. In this particular case, the Chairman of the Fed favors lowering decreasing taxes.
Answer:
7.20%
Explanation:
Given that
Coupon rate = 9%
Yield to maturity = 12%
And marginal tax rate is 40%
So by considering the above information, the after tax cost of debts is
= Yield to maturity × (1 - tax rate)
= 12% × (1 - 0.40)
= 7.20%
After considering the tax rate and then multiplying with the yield to maturity we can get the after tax cost of debt
We ignored the coupon rate
