Bond Valuation
A. Suppose that you buy a one year discount bond that has a maturity value of $10,000 and the risk free market rate is 3 percent. What is the highest price that you would be willing to pay for this bond?
B. Consider a 5 year, $50,000 face value, 4 percent coupon rate bond and suppose that the discount rate is 3 percent. What do you predict will be the market price for this bond?
Money
A. Provide a concise theoretical definition of money byreferencing the threeprimary functions of money. Also, describe two circumstances in which barter often replaces money as a means of exchange.
2. For each of the following assets, indicate whether the asset is included in M1, M2, both, or neither.
I. Currency in circulation.
II. Money market mutual funds.
III. Large time deposits.
IV. Savings deposits