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Question 1. Suppose the Fed wants to raise the nominal interest rate. Explain the three available mechanisms the Fed can use to achieve this goal. In your answer, use a graph of the money market to show how the Fed's action translates into a higher nominal interest rate. Question 2. Explain the difference between the three Fed discount window programs. b.Why does the Fed set the discount rate above the Fed Funds rate? Question 3. Suppose the Fed decides to sell $14 billion in Treasury bonds. Assume that the reserve requirement is 8%, banks hold 4% in excess reserves, but the public holds no cash. What is the total increase or decrease in the money supply which would result from the Fed's action? Explain your answer, and show your calculations. Question 4. Assume the public in the small country of Harvardia does not hold any cash. Commercial banks, however, hold 5% of their checking deposits as excess reserves, regardless of the interest rate. a. Consider the balance sheet of one of several identical banks: ASSETS LIABILITIES & NET WORTH Reserves $ 400 Checking Deposits $2,000 Loans $1,600 Net Worth $ 0 What is the required reserve ratio? b. If the total money stock (supply) is $100,000, find the total amount of reserves held in the banking system. Show your work. Use a diagram to show what the money supply curve looks like for this economy, fully labeled. c. The Harvardia Central Bank decides that it wants to cut the money stock in half. It is considering an open market operation. How many dollars worth of bonds should the Central Bank buy or sell? Assume that excess reserves are 5% and the required reserve ratio is what you found in part a. Show your work. d. Beginning from the money market equilibrium that prevailed before the open market operation, explain the effect of the Central Bank's policy on the equilibrium interest rate. Will the interest rate change more if the money demand curve is steeper or flatter? Explain with reference to one well-labeled diagram.
Calculation of budgeted production dollars and Directing and coordinating operations during the period
What must the coupon rate be on Merton's bonds? (Do not include the percent sign (%). Enter rounded answer as directed, but do not use the rounded numbers in intermediate calculations. Round your answer to 2 decimal places (e.g., 32.16). )
Phil's Carvings, Inc. wants to have a weighted average cost of capital of 9.2 percent. The firm has an aftertax cost of debt of 6.4 percent and a cost of equity of 12.8 percent. What debt-equity ratio is needed for the firm to achieve their target..
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You are planning an investment opportunity that costs $250,000 and will return 14 percent on your investment. There are higher returning investments available in the financial markets that are comparable to this investment opportunity in terms of ris..
After the merger, Safeco/Risco would have a corporate WACC of 11%. Therefore, it should reject Project X but accept Project Y.
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The bank is willing to loan the funds at 8% interest with annual payments at the end of the year for the next 10 years. What is the annual payment on this loan for Cooley Landscaping?
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What is the maximum price you would be willing to pay for a bond with 12% coupon and 7 years to maturity, assuming that you plan to hold the bond until maturity? Your coast of capital is 10%.
Also, assuming the company paid out $400 in dividends, What is the addition to retained earnings? Please show step by step of the problem, I am really trying to get this, but it is so confusing.
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