<span>If the Fed believes the economy is about to fall into recession, it should use an expansionary monetary policy to lower the interest rate and shift AD to the right. When using an expansionary monetary policy a central bank will use its tools to stimulate the economy. They increase the supply of money, lower interest rates and increase aggregate demand.
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Answer:
The answer is: If Orion wants to have $3,000 in two years, he must invest $2,572.02 today
Explanation:
To determine how much money Orion has to invest today in order to have $3,000 in two years, considering he will get an 8% compound interest rate, we can use this formula:
P = FV / (1 + r)²
Where:
P = $3,000 / (1 + 8%)²
P = $3,000 / 1.1664
P = $2,572.02
Answer:
a. The DVDs, CDs, albums, and video games held for sale to customers.
Classification: Assets
b. A long-term loan owed to Citizens Bank.
Classification: Liability
c. Promotional costs to publicize a concert.
Classification: Expense
d. Daily sales of merchandise sold
Classification: Revenue
e. Amounts due from customers
Classification: Asset
f. Land held as an investment
Classification: Asset
g. A new computer purchased for office use.
Classification: Expense
h. Amounts to be paid in 10 days to suppliers
Classification: Liability
i. Amounts paid to property owner for rent.
Classification: Expense
Answer:
Price Risk, Reinvestment Risk, Investment Horizon and Longer maturity Bond.
Explanation:
- Price risk is the risk of a decline in a bond's value due to an increase in interest rates. This risk is higher on bonds that have long maturities than on bonds that will mature in the near future.
- Reinvestment risk is the risk that a decline in interest rates will lead to a decline in income from a bond portfolio. This risk is obviously high on callable bonds. It is also high on short-term bonds because the shorter the bond's maturity, the fewer the years before the relatively high old-coupon bonds will be replaced with new low-coupon issues.
- Which type of risk is more relevant to an investor depends on the investor's investment horizon, which is the period of time an investor plans to hold a particular investment.
- Longer maturity bonds have high price risk but low reinvestment risk, while higher coupon bonds have a higher level of reinvestment risk and a lower level of price risk.
