Answer:
c. Decreases by 4.5%
Explanation:
Calculation for What is the percentage change in the PV
First step is to calculate the present value when r is 5%
PV = 100 / (1 + 5%)^1
PV = $95.24
Second step is to calculate present value when r is 10%
PV = 100 / (1 + 10%)^1
PV = $ 90.91
Last step is to calculate the percentage change in the PV
Percentage change in the PV = (90.91 - 95.24) * 100 / 95.24
Percentage change in the PV = - 4.55% (Decrease)
Therefore the Percentage change in the PV Decreases by 4.5%
Answer:
Federal funds rate
Explanation:
federal funds rate is simply known as the interest rate at which depository financial institutions borrows(lends) funds maintained at the federal reserve to other depository financial institutions usually or Maybe overnight.
It is simply the interest rate that one bank charges another for borrowing money overnight. Its importance is to help banks meet their reserve requirements and prevent bank failure and also may be use to stimulate the economy.
Answer:
- True
- False
- True
- True
Explanation:
When an economy has a strong balance sheet and a declining budget deficit, it means that there is less need to borrow from the market which would keep rates lower.
When the economy is weakening, the Fed will try to stimulate it by engaging in actions that weaken short term interest rates so that people and businesses can borrow at lower cost and invest or buy goods and services.
When investors are worried about the riskiness of other financial assets, they usually come to safer assets like U.S. Treasury bonds so that they do not lose money and this is what happened in the credit crisis of 2008. More demand for the bonds led to a rise in their price.
