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Economics problems Assignment Set.....................




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 account;that 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#55728 | Written in 18-Jul-2015

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