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Pages:
4 pages/≈1100 words
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Level:
MLA
Subject:
Accounting, Finance, SPSS
Type:
Coursework
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 25.27
Topic:
Financial Markets and Institutions: Mathematical Problems (Coursework Sample)
Instructions:
The paper's purpose was to show understanding of the level and structure of interest rates by solving mathematical problems and drawing graphs in some instances. no sources were required.
source..Content:
Students Name
Professors Name
Course
Date
Financial Markets and Institutions
Question One
Quantity demanded = Quantity supplied
30 1.5i = 2i -2
32 = 3.5i
i = 9.14%
Quantity = 30 1.5(9.14)
= 16.29
40 1.5i = 2i 2
42 = 3.5i
i = 12%
Quantity = 40 1.5(12)
= 22
There is an increase in quantity demanded. An increase in expected profits may cause a rise in demand since higher future profits may lead to more current investment by individuals and firms. Hence, the demand for loanable funds will increase. Also, if the expected future disposable income is expected to increase, then individuals will demand more loanable funds.
20 1.5i = 2i - 2
22 = 3.5i
i = 6.29%
Quantity = 20 1.5(6.29)
= 10.58
There is a decrease in quantity demanded. A decrease in expected profits may cause the decrease in demand since lower future profits may lead to less or no investment by individuals and firms. Hence, the demand for loanable funds will decrease. Also, if the expected future disposable income is expected to decrease, then individuals will demand less loanable funds.
2i = 3 1.5i
3.5i = 3
i = 0.86%
Quantity = 2(0.86)
= 1.72
In this case, the low interest rate makes saving less attractive to households, hence leading to a decrease in the quantity supplied of loanable funds.
Question Two
1 + 1R2 = [(1 + 1R1) (1 + E(2R1) + L2)]1/2
1.16 = [(1.12) (1 + 0.12 + L2)]1/2
(1.16)2 = [(1.12) (1 + 0.12 + L2)]
QUOTE = 1 + 0.12 + L2
QUOTE 1.12 = L2
L2 = 8.14%
Question Three
Amortization formula:
A = P QUOTE
In this case, r=0.06 n=30 P=$300,000
= 300,000 QUOTE
= $21,518.99 per year
= $1793.25 per month
Question Four
EMBED Equation.DSMT4
1R1 = 5%
1R2 = [(1 + 0.05)(1 + 0.08)]1/2 1 = 6.49%
1R3 = [(1 + 0.05)(1 + 0.08)(1 + 0.095)]1/3 1 = 7.48%
1R4 = [(1 + 0.05)(1 + 0.08)(1 + 0.095)(1 + 0.11)]1/4 1 = 8.35%
1R5 = [(1 + 0.05)(1 + 0.08)(1 + 0.095)(1 + 0.11)(1 + 0.09)]1/5 1 = 8.48%
Yield curve:
Question Five
Formula: 1 + E(ir1) = (1 + 1Ri)i (1 + 1Ri-1)i-1 and E(ir1) = 1 - (1 + 1Ri)i (1 + 1Ri-1)i-1
4f1 = (1.0735)4 (1.06)3 1 = 11.5%
5f1 = (1.0765)5 (1.0735)4 1 = 8.86%
6f1 = (1.08)6 (1.0765)5 1 = 9.8%
Question Six
Future Value (FV) = $3,000 Present Value (PV) = $1,500 rate per period (r) = 8.5%
FV = PV (1 + r)n
3,000 = 1,500 (1 + 0.085)n
2 = (1 + 0.085)n
Number of periods (n) =...
Professors Name
Course
Date
Financial Markets and Institutions
Question One
Quantity demanded = Quantity supplied
30 1.5i = 2i -2
32 = 3.5i
i = 9.14%
Quantity = 30 1.5(9.14)
= 16.29
40 1.5i = 2i 2
42 = 3.5i
i = 12%
Quantity = 40 1.5(12)
= 22
There is an increase in quantity demanded. An increase in expected profits may cause a rise in demand since higher future profits may lead to more current investment by individuals and firms. Hence, the demand for loanable funds will increase. Also, if the expected future disposable income is expected to increase, then individuals will demand more loanable funds.
20 1.5i = 2i - 2
22 = 3.5i
i = 6.29%
Quantity = 20 1.5(6.29)
= 10.58
There is a decrease in quantity demanded. A decrease in expected profits may cause the decrease in demand since lower future profits may lead to less or no investment by individuals and firms. Hence, the demand for loanable funds will decrease. Also, if the expected future disposable income is expected to decrease, then individuals will demand less loanable funds.
2i = 3 1.5i
3.5i = 3
i = 0.86%
Quantity = 2(0.86)
= 1.72
In this case, the low interest rate makes saving less attractive to households, hence leading to a decrease in the quantity supplied of loanable funds.
Question Two
1 + 1R2 = [(1 + 1R1) (1 + E(2R1) + L2)]1/2
1.16 = [(1.12) (1 + 0.12 + L2)]1/2
(1.16)2 = [(1.12) (1 + 0.12 + L2)]
QUOTE = 1 + 0.12 + L2
QUOTE 1.12 = L2
L2 = 8.14%
Question Three
Amortization formula:
A = P QUOTE
In this case, r=0.06 n=30 P=$300,000
= 300,000 QUOTE
= $21,518.99 per year
= $1793.25 per month
Question Four
EMBED Equation.DSMT4
1R1 = 5%
1R2 = [(1 + 0.05)(1 + 0.08)]1/2 1 = 6.49%
1R3 = [(1 + 0.05)(1 + 0.08)(1 + 0.095)]1/3 1 = 7.48%
1R4 = [(1 + 0.05)(1 + 0.08)(1 + 0.095)(1 + 0.11)]1/4 1 = 8.35%
1R5 = [(1 + 0.05)(1 + 0.08)(1 + 0.095)(1 + 0.11)(1 + 0.09)]1/5 1 = 8.48%
Yield curve:
Question Five
Formula: 1 + E(ir1) = (1 + 1Ri)i (1 + 1Ri-1)i-1 and E(ir1) = 1 - (1 + 1Ri)i (1 + 1Ri-1)i-1
4f1 = (1.0735)4 (1.06)3 1 = 11.5%
5f1 = (1.0765)5 (1.0735)4 1 = 8.86%
6f1 = (1.08)6 (1.0765)5 1 = 9.8%
Question Six
Future Value (FV) = $3,000 Present Value (PV) = $1,500 rate per period (r) = 8.5%
FV = PV (1 + r)n
3,000 = 1,500 (1 + 0.085)n
2 = (1 + 0.085)n
Number of periods (n) =...
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