One of the benefits financial capital markets offer savers is the opportunity to earn capital income. a. Savers earn capital income in the form of purchasing b. Savers earn capital income in the form of through partial ownership of a corporations that they acquire by by lending money to corporations when they purchase

One of the benefits financial capital markets offer savers is the opportunity to earn capital income. a. Savers earn capital income in the form of purchasing b. Savers earn capital income in the form of through partial ownership of a corporations that they acquire by by lending money to corporations when they purchase

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter17: Financial Markets

Section: Chapter Questions

Problem 29CTQ: If you owned a small firm that had become somewhat established, but you needed a surge of financial...

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Imagine that a local water company issued 10,000 ten-year bond at an interest rate of 6. You are thinking about buying this bond one year before the end of the ten years, but interest rates are now 9. Given the change in interest rates, would you expect to pay more or less than 10,000 for the bond? Calculate what you would actually be willing to pay for this bond.
Why can firms not just use their own profits for financial capital, with no need for outside investors?
If you owned a small firm that had become somewhat established, but you needed a surge of financial capital to cant out a major expansion, would you prefer to raise the funds through borrowing or by issuing stock? Explain your choice.
One of the benefits financial capital markets offer savers is the opportunity to earn income. a. Savers earn income in the form of purchasing b. Savers earn income in the form of through partial ownership of a corporations that they acquire by by lending money to corporations when they purchase
Lenders of funds in financial market gets opportunity to invest in O a. Banks of the government O b. Productive assets without owning them O c. Goods of a business O d. Provision of utilities for the public
U3e the tollowing graph to show the effects on the Market for Loanable Funds of businesses discovering they have more than enough capital to meet the demand for their goods: Instructions: Drag the demand curve to illustrate the appropriate change in demand. Market for Loanable Funds Interest Rate 100 Supply (Savings) 90 80 70 60 50 Demand (Investment) 40 30 20 10 10 20 30 40 50 60 70 80 90 100 Dollar volume of Savings, Investment
Please explain why this is a good investment?
1. Draw a graph when government run a change in the tax that might increase private saving. How would it affect the market for loanable funds?
Use the analysis for the market for loanable funds diagram to illustrate and explain how thefollowing government policy affect the economy’s saving and investment. Policy 1: Suppose thegovernment changes the tax code, allowing individuals to reduce their taxable income if they savemoney in registered retirement savings plans (RRSPs). Your response should answer the following questions:a. State and explain which loanable funds curve would this policy affect? b. Which way would the loanable funds curve shift? c. What would be the impact on interest rates? Draw the loanable funds diagram to illustrate your answers for a to c.
How is a firm's net income important?
The following table contains data on the relationship between saving and income. a. Rearrange the income and saving data into an ascending order of income and graph them on the accompanying grid. Income per Year $ Saving per Year 15,000 $ 0 10,000 5,000 20,000 1,000 -500 500 0 1,500 Rearranged Rearranged Income per Year Saving per Year
a. The supply of loanable funds slopes upward because O higher interest rates make it more costly to borrow. savers will make more funds available at lower interest rates. O investors will want more money made available at higher interest rates. savers will make more funds available at higher interest rates. b. The demand for loanable funds slopes downward because few investment projects yield a high rate of return. many investment projects yield an equal rate of return. many investment projects yield a high rate of return. O few investment projects yield a low rate of return. c. The equilibrium interest rate is determined where the interest rate is equal to O the amount of loanable funds. O the expected rate of return. O the expected rate of spending. O expected personal income.