货币金融学（第十二版）课后习题答案.docx

《货币金融学（第十二版）课后习题答案.docx》由会员分享，可在线阅读，更多相关《货币金融学（第十二版）课后习题答案.docx（266页珍藏版）》请在淘文阁 - 分享文档赚钱的网站上搜索。

1、PART THREEAnswersto End-of-ChapterQuestions and ProblemsChapter 1ANSWERS TO QUESTIONS1. What is the typical relationship among interest rates on three-month Treasury bills, long-term Treasury bonds, and Baa corporate bonds?The interest rate on three-month Treasury bills fluctuates more than the othe

2、r interest rates andis lower on average. The interest rate on Baa corporate bonds is higher on average than theother interest rates.2. What effect might a fall in stock prices have on business investment?The lower price for a firms shares means that it can raise a smaller amount of funds, soinvestme

3、nt in facilities and equipment will fall.3. Explain the main difference between a bond and a common stock.A bond is a debt instrument, which entitles the owner to receive periodic amounts of money(predetermined by the characteristics of the bond) until its maturity date. A common stock,however, repr

4、esents a share of ownership in the institution that has issued the stock. Inaddition to its definition, it is not the same to hold bonds or stock of a given corporation,since regulations state that stockholders are residual claimants (i.e. the corporation has to payall bondholders before paying stoc

5、kholders).4. Explain the link between well-performing financial markets and economic growth. Name onechannel through which financial markets might affect economic growth and poverty.Well performing financial markets tend to allocate funds to its more efficient use, therebyallowing the best investmen

6、t opportunities to be undertaken. The improvement in theallocation of funds results in a more efficient economy, which stimulates economic growth(and thereby poverty reduction).5. What was the main cause ofthe recession that began in 2007?The United Stateseconomy was hit by the worst financial crisi

7、s since the Great Depression.Defaults in subprime residential mortgages led to major losses in financial institutions,producing not only numerous bank failures but also the demise of two of the largestinvestment banks in the United States. These factors led to the Great Recessionthat beganlate in 20

8、076. Can you think of a reason why people in general do not lend money to one another to buy ahouse or a car? How would your answer explain the existence ofbanks?In general, people do not lend large amounts of money to one another because of severalinformation problems. In particular, people do not

9、know about the capacity of other people ofrepaying their debts, or the effort they will provide to repay their debts. Financial intermediaries,in particular commercial banks, tend to solve these problems by acquiring information aboutpotential borrowers and writing and enforcing contracts that encou

10、rage lenders to repay theirdebt and/or maintain the value ofthe collateral.7. What are the other important financial intermediaries in the economy, besides banks?Savings and loan associations, mutual savings banks, credit unions, insurance companies,mutual funds, pension funds, and finance companies

11、.8. Can you date the latest financial crisis in the United States or in Europe? Are there reasonsto think that these crises might have been related? Why?The latest financial crisis in the United States and Europe occurred in 2007-2009. At thebeginning, it hit mostly the US financial system, but it t

12、hen quickly moved to Europe, sincefinancial markets are highly interconnected. One specific way in which these markets wererelated, is that some financial intermediaries in Europe held securities backed by mortgagesoriginated in the United States, and when these securities lost their a considerable

13、part oftheir value, the balance sheet of European financial intermediaries was adversely affected.9. Has the inflation rate in the United States increased or decreased in the past few years?What about interest rates?From 2014 to mid-2017, inflation has been somewhat low, but increased more recently

14、tonear 2%;interest rates have moved in a fairly narrow range, with the benchmark 10-year U.S.treasury rate moving from a high of around 2.5%, to as low as about 1.5% then increasing again.10. Ifhistory repeats itself and we see a decline in the rate of money growth, what might youexpect to happen to

15、a. real output?b. the inflation rate?c. interest rates?The data in Figures 3,5, and 6 suggest that real output, the inflation rate,and interest rateswould all fall.11. When interest rates decrease, how might businesses and consumers change their economicbehavior?Businesses would increase investment

16、spending because the cost of financing this spending isnow lower, and consumers would be more likely to purchase a house or a car because thecost of financing their purchase is lower.12.Is everybody worse off when interest rates rise?No. It is true that people who borrow to purchase a house or a car

17、 are worse offbecause itcosts them more to finance their purchase; however, savers benefit because they can earnhigher interest rates on their savings.13. Why do managers of financial institutions care so much about the activities ofthe FederalReserve System?Because the Federal Reserve affects inter

18、est rates, inflation, and business cycles, all ofwhichhave an important impact on the profitability of financial institutions.14. How does the current size ofthe U.S. budget deficit compare to the historical budget deficitor surplus for the time period since 1950?The deficit as a percentage of GDP e

19、xpanded dramatically in 2007 but improved starting in2010; in 2009, the deficit to GDP ratio was 9.8%, and in 2016 was 3.2%, still above thehistorical average of around 2% since 1950.15. How would a fall in the value ofthe pound sterling affect British consumers?It makes foreign goods more expensive

20、, so British consumers will buy fewer foreign goodsand more domestic goods.16. How would an increase in the value ofthe pound sterling affect American businesses?It makes British goods more expensive relative to American goods. Thus, Americanbusinesses will find it easier to sell their goods in the

21、United States and abroad, and thedemand for their products will rise.17. How can changes in foreign exchange rates affect the profitability offinancial institutions?Changes in foreign exchange rates change the value of assets held by financial institutionsand thus lead to gains and losses on these a

22、ssets. Also changes in foreign exchange rates affectthe profits made by traders in foreign exchange who work for financial institutions.18. According to Figure 8, in which years would you have chosen to visit the Grand Canyon inArizona rather than the Tower ofLondon?In the mid- to late 1970s, the la

23、te 1980s to early 1990s, and 2008 to 2015, the value ofthedollar was low, making travel abroad relatively more expensive; thus, it was a good time tovacation in the United States and see the Grand Canyon. With the rise in the dollars value inthe early 1980s,late 1990s, and after 2015, travel abroad

24、became relatively cheaper, making ita good time to visit the Tower of London. This was also true, to a lesser extent, in the early2000s.The following table lists the foreign exchange rate between U.S. dollars and British pounds(GBP) during May 2017.Which day would have been the best for converting $

25、200 into Britishpounds? Which day would have been the worst? What would be the difference in pounds?Date$5-011.29175-021.29215-035-041.29161.29105-051.295005-081.294205-0905-101.29391.293905-111.288505-121.288005-151.291705-161.291205-171.294405-181.300905-1905-22 1.300605-2305-24 1.293505-25 1. 295

26、41.301805-261.279505-301.285805-311.290519. When the dollar is worth more in relation to currencies ofother countries, are you morelikely to buy American-made or foreign-madejeans? Are U.S. companies that manufacturejeans happier when the dollar is strong or when it is weak? What about an Americanco

27、mpany that is in the business of importing jeans into the United States?When the dollar increases in value, foreign goods become less expensive relative toAmerican goods; thus, you are more likely to buy French-madejeans than American-madejeans. The resulting drop in demand for American-made jeans b

28、ecause of the strong dollarhurts Americanjeans manufacturers. On the other hand, the American company that importsjeans into the United States now finds that the demand for its product has risen, so it is betteroff when the dollar is strong.20. Much ofthe U.S. government debt is held by foreign inve

29、stors as treasury bonds and bills.How do fluctuations in the dollar exchange rate affect the value ofthat debt held byforeigners?As the dollar becomes stronger (worth more) relative to a foreign currency, one dollar isequivalent to (can be exchanged for) more foreign currency. Thus, for a given face

30、 value ofbond holdings, a stronger dollar will yield more home currency to foreigners, so the asset willbe worth more to foreign investors. Likewise, a weak dollar will lead to foreign bond holdingsworth less to foreigners.ANSWERS TO APPLIED PROBLEMS21. The following table lists the foreign exchange

31、 rate between U.S. dollars and British pounds(GBP) during May 2017.Which day would have been the best for converting $200 intoBritish pounds? Which day would have been the worst? What would be the difference inpounds?5-011.29175-021.29215-031.29165-041.29105-05 1.295005-08 1.294205-09 1.293905-10 1.

32、293905-111.288505-121.288005-151.291705-16 1.291205-17 1.294405-18 1.300905-19 1.301805-221. 300605-231. 2984105-24 1.293505-251.295405-2611.279505-301. 285805-311.2905The best day is 5/26. At a rate of$1.2795/pound, you would have f156.31. The worst day is5/19.At $1.3018/pound, you would have f153.

33、63, or a difference of f2.68ANSWERS TO DATA ANALYSIS PROBLEMS1. Go to the St.Louis Federal Reserve FRED database and find data on the three-monthtreasury bill rate (TB3MS), the three-month AA nonfinancial commercial paper rate(CPN3M), the 30-year treasury bond rate (GS30), the 30-year fixed rate mor

34、tgage average(MORTGAGE30US), and the NBER recession indicators (USREC). For the mortgage rateindicator, set the frequency setting to monthlya. In general, how do these interest rates behave during expansionary periods?Generally speaking, the interest rates fall during recessions, and rise during exp

35、ansionaryperiods.b. In general, how do the three-month interest rates compare to the 30-year rates? How dothe Treasury rates compare to the respective commercial paper and mortgage rates?In nearly all instances, the 30-year rates are significantly higher than the three-monthrates. Likewise, in most

36、cases, the 30-year mortgage rate is higher than the 30-yeartreasury rate, and the three-month commercial paper rate is higher than the three-monthtreasury rate.c. For the most recent available month of data, take the average of each ofthe three-monthrates and compare it to the average ofthe three-mo

37、nth rates from January 2000. How dothe averages compare?d. For the most recent available month of data, take the average of each of the 30-yearrates and compare it to the average ofthe 30-year rates from January 2000. How do theaverages compare?May 2017January 2000Three-month rate avg.0.925. 5330-ye

38、ar rate avg.3.497.42See table above. For both rate averages, they have decreased significantly since January2000.2. Go to the St.Louis Federal Reserve FRED database and find data on the Ml money supply(MISL) and the 10-year treasury bond rate (GS10). Add the two series into a single graph byusing th

39、e Add Data Seriesfeature. Transform the MI money supply variable into the M1growth rate by adjusting the units for the MI money supply to Percent Change from YearAgo.a. In general, how have the growth rate ofthe MI money supply and the 10-year treasurybond rate behaved during recessions and during e

40、xpansionary periods since the year2000?Generally, the 10-year treasury rate fell during the recessionary periods of2001 and2007-2009; during expansionary periods, there was less of a pattern, but there seems tobe a long-run downward trend in the interest rate. The money growth rate increasedsignific

41、antly during recessionary periods; however, during expansions, there is less ofapattern; following the 2001 recession,money growth gradually declined, but after the2007-2009 recession, money growth was relatively high and variable.b. In general, is there an obvious, stable relationship between money

42、 growth and the10-year interest rate since the year 2000?When money growth rises, the 10-year treasury rate appears to fall, and vice-versa;however, this effect is more obvious over some periods than others.c. Compare the money growth rate and the 10-year interest rate for the most recent monthavail

43、able to the rates for January 2000. How do the rates compare?May 2017 January 2000Ml Money Growth8. 002. 1910-year Treasury rate2.306.66The money growth rate is significantly higher in May 2017 than it was in January 2000.The 10-year treasury rate is significantly lower in May 2017 than it was in Ja

44、nuary 2000.Chapter 2ANSWERS TO QUESTIONS1. IfI can buy a car today for $5,000 and it is worth $10,000 in extra income to me next yearbecause it enables me to get ajob as a traveling salesman, should I take out a loan fromLarry the Loan Shark at a 90% interest rate ifno one else will give me a loan?

45、Will I bebetter or worse off as a result oftaking out this loan? Can you make a case for legalizingloan sharking?Yes, I should take out the loan, because I will be better off as a result of doing so. My interestpayment will be $4,500 (90% of$5,000), but as a result, I will earn an additional $10,000

46、,soI will be ahead ofthe game by $5,500.Since Larrys loan-sharking business can make somepeople better off, as in this example, loan sharking may have social benefits.(One argumentagainst legalizing loan sharking, however, is that it is frequently a violent activity.)2. Some economists suspect that

47、one ofthe reasons economies in developing countries grow soslowly is that they do not have well-developed financial markets. Does this argument makesense?Yes, because the absence of financial markets means that funds cannot be channeled topeople who have the most productive use for them. Entrepreneurs then cannot acquire fundsto set up businesses that would help the economy grow rapidly.3. Give at least three examples of a situation in which financial markets allow consumers tobetter time their purchases.Examples ofhow financial markets allow consumers to better time their purchases include: