Compute the rate of interest associated with each of these bonds that matures in one year
Subject: Business / Finance
Question
Compute the rate of interest associated with each of these bonds that matures in one year:
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a.
$100
$80
b.
$100
$90
c.
$100
$95
d.
$200
$180
e.
$200
$190
f.
$200
$195
g.
Describe the relationship between the selling price of a bond and the interest rate.
Suppose that the demand and supply schedules for bonds that have a face value of $100 and a maturity date one year hence are as follows:
100 0 600
95 100 500
90 200 400
85 300 300
80 400 200
75 500 100
70 600 0
Draw the demand and supply curves for these bonds, find the equilibrium price, and determine the interest rate.
Now suppose the quantity demanded increases by 200 bonds at each price. Draw the new demand curve and find the new equilibrium price. What has happened to the interest rate?
Compute the dollar price of a German car that sells for 40,000 euros at each of the following exchange rates:
$1 = 1 euro
$1 = 0.8 euro
$1 = 0.75 euro
