Answer:
c. I , III, and IV
Explanation:
M1 and M2 are amongst the ways of measuring money supply of an economy.
M1 basically includes physical currency and coins, demand deposits, traveler's checks, and other checkable deposits.
M2 is regarded as a broader classification than M1 since it includes assets that are highly liquid but are not cash.
M2 includes M1 plus savings deposits, money market deposits, certificate of deposits less than $100,000 and money market mutual fund balances which can be readily redeemed.
Unlike the types of financial assets defined as money that are included in money supply, credit card transactions create loans that the borrower must pay later and hence are excluded from M2.
Hence M2 will include $5,000 certificate of deposits, $ 1000 in traveler's checks and $ 500 in piggy bank i.e option (c)
Answer: <em>a. Multiplier = 3.33</em>
<em>b. Stimulation = $2000 billion</em>
Explanation:
In this particular case , it's given:
Marginal propensity to consume(MPC) = 0.7
Government spending = $600 billion
Therefore, we can evaluate the multiplier using the following formula:
Multiplier = 3.33
Noe, in order to find the stimulation in the economy we will multiple the new government spending with the multiplier. We will get ;
Stimulation = $2000 billion
Answer:
None of the answers are correct . Financial managers should evaluate investors aversion to risk in order to make choices according to the investor profile.
Explanation:
Answer:
The question is missing the options which are below:
A Real risk-free rate differences.
B Tax effects.
C Default risk differences.
D Maturity risk differences.
E Inflation differences.
The correct answer is option C,default risk differences.
Explanation:
Default risk is the increase in return given to an investor to compensate the investor for the likely losses that may arise due to the inability of the borrower to make funds available to the investor on the maturity date or even in required amount.
Different debt instruments have different default risk depending on their credit rating as rated by international rating agencies.Such rating is a function of many factors,which includes:
Balance sheet position
Profitability
Liquidity strength of the company
Macro-economic factors and some others.
Liquidity refers to the ability of the company to settle obligations such as repayment of bonds and interest when due.
Invariably,liquidity has a higher impact in determining credit rating as well as default risk of an instrument.
