Given that the inflation rate in 2006 was about 3.24%, while a short-term municipal bond offered a rate of 2.9%, which of the following statements is correct? a. the real interest rate for investors in these bonds was > the rate of inflation. b. investors in these bonds were able to buy less at the end of the year than they could have purchased at the start of the year. c. the purchasing power of investors in these bonds grew over the course of the year. d. the nominal interest rate offered by these bonds gave the true increase in purchasing power that resulted from investing in these bonds.
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Agood for which demand increases as income rises is and a good for which demand increases as income falls is
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The treasurer for pittsburgh iron works wishes to use financial futures to hedge her interest rate exposure. she will sell five treasury futures contracts at $139,000 per contract. it is july and the contracts must be closed out in december of this year. long-term interest rates are currently 7.30 percent. if they increase to 9.50 percent, assume the value of the contracts will go down by 20 percent. also if interest rates do increase by 2.2 percent, assume the firm will have additional interest expense on its business loans and other commitments of $149,000. this expense, of course, will be separate from the futures contracts. a. what will be the profit or loss on the futures contract if interest rates increase to 9.50 percent by december when the contract is closed out
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Given that the inflation rate in 2006 was about 3.24%, while a short-term municipal bond offered a r...
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