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3 years ago

What happens if the fed sells $5 billion worth of treasury bonds on the open market?

1 answer:

4 0

The Fed sells of reserve bonds to affect the money supply on the open market. Therefore, the fed sells $5 billion worth of T-bonds, then that means they will be taking out a big lump out of your bank put down. In the meantime, the fed sells might pump $5/billion into the financial system by incomplete set aside banking into the grouping and itâ€™s more like $50/billion and the Fed gets the Bonds and the financial system gets the money. Will have to the fed wish to take out cash from the market, it could sell those bonds and take cash out of the economy in trade for bond.

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Baylor Bank believes the New Zealand dollar will appreciate over the next five days from $.48 to $.50. The following annual inte

Nitella [24]

Answer:

Its dollar profit from speculation over the five-day period will be $208,035.93.

Explanation:

This can be determined as follows:

Assuming Baylor Bank borrow $5,000,000

The borrowing will be converted to New Zealand dollar at the current exchange rate and we will have:

Conversion = $5,000,000 / 0.48 = NZ$10,416,667

The NZ$10,416,667 shall be invested at an annualized based on New Zealand lending rate of 6.75% over five days. This will produce future value (FV) as follows:

FV of investment = Amount invested * (1 + NZ lending rate)^(5 years / 360 days) = NZ$10,416,667 * (1 + 6.75%)^(5 / 360) = NZ$10,426,121.44

Converting the NZ$10,426,121.44 to dollar at the new rate of $.50 as follows:

New conversion = NZ$10,426,121.44 * $.05 = $5,213,060.72

Amount to repay based on the US borrowing rate = Amount borrowed in USD * (1 + US borrowing rate)^(5 years / 360 days) = $5,000,000 * (1 + 7.5%)^(5 / 360) = $5,000,000 * 1.00100495826555 = $5,005,024.79

Profit = New conversion - Amount to repay = $5,213,060.72 - $5,005,024.79 = $208,035.93

Therefore, its dollar profit from speculation over the five-day period will be $208,035.93.

3 0

3 years ago

Big Red Machines, a startup, has come up with a new product and has seen significant customer demand. Due to reinvestment in the

Bad White [126]

Answer:

The correct answer is "$ 30.34".

Explanation:

The value of the stock can be computed by the following formula:

⇒ $\frac{Dividend \ in \ year \ 3}{(1 + Required \ return \ rate)2} + \frac{Dividend \ in \ year \ 4}{(1 + Required \ return \ rate)3} + \frac{Dividend \ in \ year \ 5}{(1 + Required \ return \ rate) 4 } + \frac{1}{(1 + Required \ return \ rate)4 }\times [\frac{( Dividend \ in \ year \ 5 (1 + Growth \ rate)} {( Required \ return \ rate - Growth \ rate)}]$

On putting the values, we get

⇒ $\frac{1.50}{1.08^2} + \frac{1.60}{1.08^3} + \frac{1.75}{1.08^4 } + \frac{1}{1.08^4} \times [ \frac{( 1.75\times 1.03)}{(0.08 - 0.03)}]$

⇒ $\frac{1.50}{1.08^2 } + \frac{1.60}{ 1.08^3 } + \frac{37.80}{ 1.08^4 }$

⇒ $30.34$ ($)

8 0

3 years ago

A firm currently has a debt-equity ratio of 1/2. The debt, which is virtually riskless, pays an interest rate of 6%. The expecte

Svetradugi [14.3K]

Answer:

Expected return on equity is 11.33%

Explanation:

Using Weighted Average Cost Capital without tax formula, overall rate of return is given by the formula:

WACC=(Ke*E/V)+(Kd*D/V)

Kd is the cost of debt at 6%

Ke is the cost of equity at 12%

D/E=1/2 which means debt is 1 and equity is 2

D/V=debt/debt+equity=1/1+2=1/3

E/V=equity/debt+equity=2/1+2=2/3

WACC=(12%*2/3)+(6%*1/3)

WACC=10%

If the firm reduces debt-equity ratio to 1/3,1 is for debt 3 is for equity

D/V=debt/debt+equity=1/1+3=1/4

E/V=equity/debt+equity=3/1+3=3/4

WACC=10%

10%=(Ke*3/4)+(6%*1/4)

10%=(Ke*3/4)+1.5%

10%-1.5%=Ke*3/4

8.5%=Ke*3/4

8.5%=3Ke/4

8.5%*4=3 Ke

34%=3 Ke

Ke=34%/3

Ke=11.33%

4 0

3 years ago

What would marginal analysis put an emphasis on?

DIA [1.3K]

The answer to this question is: additional costs and benefits.
 is an examination of the additional benefits that received from doing an activity compared to the cost that must be incurred in order to do that activity.
This analysis will help companies to determine what operations that they should maintain in the future in order to keep the profit margin of the company.

5 0

3 years ago

3.6.2 Teut (COT): The Pret la foi

koban [17]

The correct answer is B. Rural areas

Explanation:

High population densities, as well as high housing prices, are mainly found in cities or nearby areas as most jobs and industries are located in these areas. This increases not only the number of people that live in these zones but also the price of housing as the prices of properties are higher due to a higher demand. This means, zones such as inner-city neighborhoods, suburbs, and similar are highly populated and the house prices are high.

On the other hand, nowadays rural areas have a small population density because most people are not interested in living in rural areas as it would take more time to get to cities where jobs and major industries are. Similarly, the housing prices are lower because the demand or number of people interested in buying properties is lower, which makes general housing prices lower.

3 0

3 years ago