A corporation issues a three year bond with a coupon of $50 and a face value of $1000. Immediately after being issued, market interest rates decline to 4%. What is the price of the bond? Report your answer to the nearest dollar
What will be an ideal response?
Since the price of the bond equals its present value, the price is $50/1.04 + $50/(1.04)2 + $1050/(1.04)3 = $1029.
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Which of the following is NOT a reason why collusion may be hard to sustain?
A. Firms observe their rivals' prices only imperfectly. B. Marginal costs, and therefore agreed-upon prices, may differ among firms or products. C. Prices wars in practice may not conform to the predictions of the Bertrand model. D. The potential profits from collusion can be so high as to create an incentive not to undercut.
Which of the following will not generally be true of a monopolistic competitor operating in the long run? a. It will be earning normal profits
b. Its marginal revenue = marginal cost. c. Its average total cost will be minimized. d. Its price will be greater than its marginal cost.
If cash is deposited into a checking account, the supply of money increases
Indicate whether the statement is true or false
For this question, assume that the Fed is expected to respond to any event by keeping the interest rate constant (i.e., equal to its initial level). An unexpected tax cut will cause
A) stock prices to fall. B) stock prices to rise. C) no change in stock prices. D) an ambiguous effect on stock prices.