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ECO-Suppose that demand and supply for a security is given by the following equations

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Question;1. Suppose that demand and supply for a security is given by the following equations:Demand: BD = 250 ? 0.15b,Supply: BS = 100 + 0.05b,where b is the price of the security in dollars.a. Calculate the equilibrium price and equilibrium quantity of the security.b.;Suppose that the supply curve shifts to BS = 150 + 0.05b. Find the new;equilibrium price and equilibrium quantity of the security.c. Explain in words, if the equilibrium price and equilibrium quantity rise or fall after the shift in supply curve.2.;Suppose you are 22 years and would like to get married at the age of;27. To start a new life,you would like to have $100,000. If the interest;rate is 6 percent, about how much do you need to save today?3. George has almost $30,000 in his account. Some years ago he put $21,320 into his accountthat promised to pay 5 percent interest. How many years ago did he open his account?4.;Four years ago Matt deposited some money into an account. He earned 5;percent on this account and now has a balance of about $30,388. How much;did he deposit into his account when he opened it?5. Consider a;coupon bond that pays $100 every year and repays its principal amount;of $1000 at the end of ten years. If the rate of discount is 8 percent;what is the present value of the bond?6. Consider a two-year coupon;bond that has a present value of $10,000. If the rate of discount is 3;percent, and the payment made at the end of each year is $250, what is;the principal amount to be repaid at the end of two years?7. Suppose;that you are considering the purchase of a security that pays $600;every year and repays its principal amount of $10,000 at the end of four;year.a. How much would you be willing to pay for this security if the market interest rate is 6 percent?b.;Suppose that you have just purchased the security, and suddenly the;market interest rate falls to 5 percent. What is the security worth?c.;Suppose that one year has elapsed, you have received the first payment;of $600, and the market interest rate is still 5 percent. How much would;another investor be willing to pay for your security?d. Suppose;that two years have elapsed since you purchased the security, and you;have received the first two payments of $600 each. Now suppose that the;market interest rate suddenly jumps to 10 percent. How much would;another investor be willing to pay for your security?8. You buy a;government bond that pays interest twice a year. The interest payment is;$300 each six months. The bond matures in six years. The face value of;the bond is $10,000.The annual market interest rate is 6 percent.a. What is the present value of the bond? Show your work.b.;After six months go by, you receive the first interest payment of $300.;The annual market interest rate has declined to 5 percent and you;decide to sell the bond. What is the bond?s present value when you sell;it? Show your work.c. What is your total return from owning the bond;for six months (expressed at an annual rate, in percentage points, with;two decimals)? Show your work.9. Suppose you take out a car loan of;$18,000 for 5 years at an annual interest rate of 8 percent, with;payments to be made monthly. What will your monthly payments be?10.;Suppose you take out a home equity loan of $250,000 for 25 years at an;annual interest rate of 6 percent, with payments to be made monthly.;What will your monthly payments be

 

Paper#55396 | Written in 18-Jul-2015

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