How can the real rate of interest be negative

Assignment Help Financial Management
Reference no: EM131305460

In the United States, during some years in the 1970s, the real rate of interest on many bonds was negative.

a. How can the real rate of interest be negative?

b. Why were lenders willing to accept a negative real rate of interest during the 1970s?

Reference no: EM131305460

Questions Cloud

Identify major historical developments in world cultures : Explain why each piece is considered to be historically significant.Explain why the other two (2) composers were ultimately not selected. Specifically identify the musical elements in the composer's style that you would like to be included in the n..
Explain what is happening in graphs : Use a demand and supply graph for bonds to illustrate each of the following situations.- Explain what is happening in your graphs.
Find the probability that his/her grade is less than 50 : The grades of a group of 1000 students in an exam are normally distributed with a mean of 70 and a standard deviation of 10. A student from this group is selected randomly.
Evaluate performance of capm : Test CAPM and Fama-French 3 factor models using linear regression. Comment on regression intercepts and coefficients. Evaluate performance of CAPM and Fama-French 3 factor model
How can the real rate of interest be negative : How can the real rate of interest be negative?- Why were lenders willing to accept a negative real rate of interest during the 1970s?
Is there anything in this vignette that is unethical : Is there anything in this vignette that is illegal? Cite your state law.Is there anything in this vignette that is unethical? Cite the relevant codes from the 2014 ACA Code of Ethics and/or the 2010 ASCA Ethical Standards for School Counselors.Is ..
Explain whether the demand curve for bonds : Explain whether the demand curve for bonds, the supply curve for bonds, or both would shift. Be sure to indicate whether the curve(s) would shift to the right or to the left.
Explain the emotional-psychological response to medical : Explain the EMOTIONAL-PSYCHOLOGICAL RESPONSE TO MEDICAL CRISES and THE CRISIS RESPONSE OF THE FAMILY AND CULTURAL CONSIDERATIONS.
Explain how the bond market adjusts to equilibrium : Why does the supply curve for bonds slope up? Why does the demand curve for bonds slope down?- Explain how the bond market adjusts to equilibrium.

Reviews

Write a Review

Financial Management Questions & Answers

  What is your dollar profit and percentage return

You can buy a 6-month call contract (i.e., for 100 shares) with an exercise price of $65 for a cost of $2.10 *100. Assume the risk-free rate of return is 0%. What is your dollar profit (loss) and percentage return if you purchase one call contract, a..

  Your portfolio would gain-lose approximately how much money

You have $250,000 invested in bond A which has a modified duration of 3 and $175,000 invested in bond B which has a modified duration of 12. If interest rates rise by 50 basis points, your portfolio would gain/lose approximately how much money?

  What is the intrinsic value of this preferred stock

Onnie Banko Swimwear recently issued $75.00 par-value preferred stock that pays a 7.00% dividend rate per year. The stock has a beta of 1.09, and the current risk-free rate is 2.40% and the market return (RM) is 11.80%. Assuming that CAPM holds, what..

  What is the expected return on the market

What is the expected return on the market and What is the risk-free rate?

  Capital budgeting timeline with their periods and cash flows

You have the following capital budgeting timeline with their periods and cash flows: 0 = ?, 1 = $4500, 2 = $4900, 3 = ?, 4 = ?, 5 = $4000, 6 = $3750. The terminal value of the project is $34,806.73. The NPV = $1311.33 and the cash flow in period 4 ca..

  What is the yield to call of the bond

A 5.55 percent coupon bond with 14 years left to maturity can be called in five years. The call premium is one year of coupon payments. It is offered for sale at $1,106.30. What is the yield to call of the bond?

  Determine if covered interest arbitrage is possible

Ultimate goal? Determine if Covered Interest Arbitrage is possible or not. State whether yes or no. Dollar amount available on a 90-day U.S. deposit Dollar profit over and above the dollar amount available on a 90-day U.S. deposit

  What is the maturity risk premium for two-year security

The real risk-free rate is 3%, and inflation is expected to be 2% for the next 2 years. A 2-year Treasury security yields 7.8%. What is the maturity risk premium for the 2-year security?

  Is aggies transaction exposure likely to be affected

All of these companies invoice the products in US dollars. Is Aggie's transaction exposure likely to be significantly affected if the euro strengthens or weakens? Explain.

  Market rate of return on similar securities

Farrowtech currently does not pay a dividend and they have announced to the market that they will not pay a dividend for the next ten years. However, analysts expect that they will pay their first dividend of $3.66 in eleven years and they feel that ..

  Use the NORMDIST function in Excel

Suppose the average return on an asset is 11.5 percent and the standard deviation is 20 percent. Further assume that the returns are normally distributed. Use the NORMDIST function in Excel to determine the probability that in any given year you will..

  What is the business loans price elasticity

Nora, a highly motivated entrepreneur plans on applying for a business loan from Bank of America. She finds out that the percent change in price of business loans increased to 7% last month. This resulted in a 50% percent change in quantity demanded ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd