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Suppose an increase in computer financial technology causes consumers to decrease the amount of money they hold in currency from 5% of the amount they hold in deposits to 1%. The monetary base in $650 million, the required reserve ratio is 3% and banks hold an extra 2% of deposits in excess reserves.
a. What is the impact on M1 money supply?
b. What is the impact on the amount of deposits held in the banking sector?
c. What is the impact on the interest rate in equilibrium?
Ebay is considering whether to establish a sale distribution center in China. Given the large Chinese consumer market, Eaby estimates that its net sales revenues will be 15 million yuans in the first year, 20 million yuans in the second year, and 35 ..
Rolston Music Company is considering the sale of a new sound board used in recording studios. The new board would sell for $25,800, and the company expects to sell 1,430 per year. The company currently sells 1,930 units of its existing model per year..
Examine who is involved in financial decision-making and analyze what are the steps in the financial decision-making process.
Susan saved $500 at the end of every month in her retirement account for 10 years (during age 25-35) and then quit saving. However, she did not make any withdrawal until she turned 65 (i.e., 30 years after she stopped saving). Her friend Cathy starte..
The parents of a girl are planning to finance her college education. They want to make 48 quarterly deposits (equal amounts) in an account, which pays interest at 9% compounded monthly. What is the size of each quarterly deposit?
A bond with a face value of $1,000 has annual coupon payments of $100 and was issued seven years ago. The bond currently sells for $1,085, has eight years left to maturity. This bond's ________ must be less than 10%.
Fama’s Llamas has a WACC of 10.7 percent. The company’s cost of equity is 14 percent, and its pretax cost of debt is 8.5 percent. The tax rate is 35 percent. What is the company’s target debt–equity ratio?
Loan with these terms: Remaining balance of $150,000, interest rate of 8 percent, and remaining term of 10 years (monthly payments) Suppose a homeowner has an existing mortgage l. This loan can be replaced by a loan at an interest rate of 6 percent, ..
Assume that the expectations theory holds, and that liquidity and aturity risk premiums are zero, If the annual rate of interest on a 2year Treasury bond is 8 percent and the rate on a 1-yearTreasury bond that is issued today is 6 perecnt, What rate ..
Find the intrinsic value of a call for both the buyer and writer if the market price of the underlying stock is $37.50 per share, up from $34.00 three months ago.
MMK Cos. normally pays an annual dividend. The last such dividend paid was $2.55, all future dividends are expected to grow at a rate of 8 percent per year, and the firm faces a required rate of return on equity of 13 percent. If the firm just announ..
A home equity line of credit (HELOC) is, loosely speaking, like a credit card for your home. You can borrow money by drawing down on the line of credit. But, because the borrowed money is for the purpose of your home, the interest is tax-deductible m..
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