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Sloan [31]
2 years ago
10

The Federal Reserve can: A. simultaneously set any money supply and any nominal interest rate target. B. set the target money su

pply and target nominal interest rate independently. C. only set a money supply target that is consistent with the target nominal interest rate. D. only target the money supply, not the nominal interest rate.
Business
1 answer:
adell [148]2 years ago
4 0

Answer:

The answer is C.

Explanation:

The Federal Reserve acts as the Central Bank. And the tool it uses to control the economy is monetary policy and its tools are:

1. Reserve requirements

2. Open market operation

3. Discount rate(interest rate)

The Federal reserve can control the money supply in the eco economy through any of these tools.

For example, if Federal reserve wants to increase the money supply, they can do the following:

a) reducing the interest rate it lends commercial banks money, commercial banks too reduces the interest it charges businesses or households. With lower interest, households and businesses are encouraged to borrow, thereby increasing the money supply and vice-versa.

b) lowering the reserve requirements. Reserve requirement is the minimum balance commercial banks must have with the federal reserves. This is guided by law. Lowering the reserve requirements enable commercial banks to have more money to lend to their customers and vice-versa.

In all, Federal reserve use any of these tools to control money supply that is consistent with their target nominal interest rate.

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Given the following information: Percent of capital structure: Preferred stock 10 % Common equity (retained earnings) 40 Debt 50
sasho [114]

Answer: 8.23%

Explanation:

Firstly, we will calculate the cost of debt which will be:

= Yield (1-Tax rate)

= 9% × (1-0.34)

= 9% × 0.66

= 5.94%

Then, the Cmcost of preferred stock will be:

= 7/(104-9.40)

= 7/(94.6)

= 7.39%

We will also get the value of the cost of equity which will be:

= (Dividend expected common/Price common) + growth rate

= (2.50/76) + 8%

= 3.29% + 8%

= 11.29%

For Debt:

Cost after tax: 5.94

Weight = 50%

Weighted cost = 5.94 × 50% = 2.97

For Preferred stock:

Cost after tax: 7.39

Weight = 1%

Weighted cost = 7.39 × 10% = 0.74

For Common equity

Cost after tax: 11.29

Weight = 40%

Weighted cost = 11.29 × 40% = 4.52

Weighted average cost of capital = 2.97 + 0.74 + 4.52 = 8.23%

8 0
2 years ago
last year, jarod left a job that pays $80,000 to run his own bike repair shop. jarod’s shop charges $65 for a repair, and last y
irinina [24]

The accounting profit of Jarod based on the information regarding rent, wages, etc given will be $55000.

It should be noted they the formula for calculating accounting profit will be:

= Total revenue - Explicit cost

Total revenue will be:

= $65 × 4000

= $260,000

Explicit cost is the direct cost that a business spends. This will be:

= $60000 + $120000 + $25000

= $205,000

Therefore, the accounting profit will be:

= $260000 - $205000

= $55,000

The accounting profit is $55000.

Read related link on:

brainly.com/question/25373796

6 0
2 years ago
Financial assets A. directly contribute to the country's productive capacity. B. indirectly contribute to the country's producti
goblinko [34]

Answer:

B) indirectly contribute to the country's productive capacity.

Explanation:

Financial assets are non-physical assets whose value is determined by contractual rights, e.g. cash, stocks, bonds, bank CDs, etc.

Financial assets indirectly contribute to the country's productive capacity since they allow individuals and businesses to invest in other private firms and government securities. This increases the amount that private firms and government can invest or spend.

3 0
2 years ago
Read 2 more answers
ease answer the question below based on the closing spot and the July futures contract prices for euros for four consecutive day
kherson [118]

Answer:

If a person sold euro futures on <u>3/01</u> then he/she will post a profit on <u>3/02</u> :

Explanation:

Date                                                    3/01        3/02       3/03       3/04

Euro Spot Price                              $1.1585   $1.1589  $1.1584   $1.1593

July euro Futures Contract Price  <u>$1.1850</u>   <u>$1.1812</u>   $1.1823   $1.1820

On March 1, the price of the euro futures contract was $1.1850 per euro, which means that a €1,000 contract is worth $1,185.50. On March 2, the euro futures contract was worth less, only $1.1812 per euro, that means that a €1,000 contract is worth $1,181.20. So you could have earned $1,185.50 - $1,181.20 = $4.30 per contract. It doesn't seem much, but it represents a 0.36% gain in one day.

5 0
3 years ago
A stock has an expected return of 14.3 percent, the risk-free rate is 3.9 percent, and the market risk premium is 7.8 percent. w
AysviL [449]

The beta of this stock is 1.33

Given,

Expected Stock Return = 14.3%

Risk free rate of interest = 3.9%

Market Risk Premium = 7.8%

In order to calculate the beta of the stock, a formula is used-

Expected stock return = Risk free rate + beta x ( market return - risk free rate)

Thus, by putting values in the formula, we get

14.3% = 3.9% + beta × 7.8%

Subtract 3.9% from both sides,

14.3% - 3.9% = beta × 7.8%

Or, 10.4% = beta × 7.8%

Thus, after dividing both sides by 7.8%, we get

Beta = 10.4 ÷ 7.8  = 1.33

Therefore, Beta is 1.33

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7 0
1 year ago
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