T-Mobile 45% 11:43 PM elearn.uta.edu QLExplain difference between Money and: a.
ID: 1117654 • Letter: T
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T-Mobile 45% 11:43 PM elearn.uta.edu QLExplain difference between Money and: a. Income b. Wealth Q2.Ceteris paribus, if an individual movoes small-denomination time deposit to a demand deposit account then A) MI increases and M2 stays the same. B) M1 stays the same and M2 increases. C) MI stays the same and M2 stays the same. D) M1 increases and M2 decreases. E) None of the above money from a Q3.Ceteris paribus, if an individual redeems a T-Bill for currency then A) M1 stays the same and M2 decreases. B) MI increases and M2 increases. C) M1 increases and M2 stays the same. D) MI stays the same and M2 stays the same. E) M1 decreases and M2 increases 04. Assume that a S1,000 three year T-Note is currently trading at $914.61 assuming that investors Ignoring income tax considerations, and require additional 0.4% liquidity risk premium to buy and hold corporate securities rather than T-securities, please calculate default risk premium on a S1,000 three year BB+ rated corporate note currently trading at $839.62 Note: Please apply standard rounding A). 2.98% B), 3.60% C). 5.60% D). 2.58% E). 3.42% Q5, Assume that a $1,000 face value 1- year bond issued by the City of Arlington is currently trading at S980.39, and a 2-year bond issued by that city with the same face value is currently trading at S907.03 According to the Expectations Theory of the Term Structure, the price of that City's $1,000 1-year bond will be next year Hint: Please apply a discount bond valuation approach. Standard rounding applies.Explanation / Answer
1. Money is a medium of exchange. Money is someting which has value and it is widely accepted as a medium of exchange. Whereas, Income is revenue earned from any productive economic activity. Whereas, Wealth is a store of value. Wealth comprises of all the valuable assets owned by an individual.
2. Option A. M1 increases and M2 stays the same.
M1 comprises of Coin, Currency, Demand Deposits and Traveller's Cheques. Whereas, M2 comprises of M1 + Saving Deposits, Time Deposits, Money market deposits, money market mutual funds.
3. Option C. M1 increases and M2 stays the same. Since M2 comprises of the components of M1. So, an increase in currency would lead to an increase in M1 whereas M2 stays the same because its just a conversion within M2 components.
4. Option D. 2.58%.
Default Risk Premium = Required Rate of Return - Risk free rate of return - Inflation Premium - Liquidity Premium - Maturity Risk Premium.
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