Choose the true statement regarding money demand: money demand is determined by
ID: 1201072 • Letter: C
Question
Choose the true statement regarding money demand: money demand is determined by the fed. What is the annual coupon payment of a bond with a face value of $1000 and an annual interest rate of 3%? $1030 $1003 $300 $30 None of the above The market value of most interest-bearing bonds trading on the secondary market is: proportional to the interest rate. inversely related to the interest rate. determined by the Federal Reserve. uncorrelated with the interest rate. rises when the Fed increases the discount rate. If the money multiplier is 3. the required reserve ratio is 2%. 20%. 25%. 50%. None of the above are correct When interest rates are low: individuals hold more of their assets in the form of bonds. individuals hold more of their assets in the form of money the optimal balance is biased toward bonds. bonds are more attractive than money. the cost of holding money is high. The higher the discount rate... The lower the cost of borrowing The higher the amountExplanation / Answer
Answer 6 money demand and interest rate are negatively related. One part of demand is speculative demand which have inverse relation with interest rate if higher interest rate is charged then less amount of money will be demanded.
Answer 7 Face value = $1000
Interest rate = 3%
Annual coupon payment = 1000*3/100 = $30
answer will be D $30
Answer 9 Money Multiplier = 3%
Required reserve ratio = (1/ money multiplier) *100
= (1/3) * 100 = 33.33%
hence answer is E none of the answer are correct.
Answer 11 The higher the discount rate higher will be the cost of borrowing. This is because as the discount rate is the rate at which central provide loan to the commercial banks. so when the rate at which loan provided to commerial ban will be higher then they will also charge higher for the borrowings and hence higher will be the cost of borrowings.