Fin 881 - Study guides, Class notes & Summaries

Classify each of the following in terms of their effect on interest rates: 1. Covenants on borrowing become more restrictive 2. Fed increases money supply 3. Total household wealth increases - correct answer 1,2,3 decreases an investor wants to buy 4% more goods and services in the future in order to induce her to invest today. During the investment period prices are expected to rise by 2%. Which statements are true? 1. 4% is desired rfr 2. 6% is nomi...

Classify each of the following in terms of their effect on interest rates: 1. Covenants on borrowing become more restrictive 2. Fed increases money supply 3. Total household wealth increases - Answers-1,2,3 decreases an investor wants to buy 4% more goods and services in the future in order to induce her to invest today. During the investment period prices are expected to rise by 2%. Which statements are true? 1. 4% is desired rfr 2. 6% is nominal rate of interest required 3. 2% is the ...