Question: The federal funds rate has been very low (close to zero for several years). In December the rate increased and is expected to increase several more times over the next few years. Assuming all other factors stay the same would you be more likely to purchase a home now or two years from now knowing the federal fund rate will likely change? Why?
Suppose you are comparing two credit cards. Visa has an annual rate of 16% and is compounded daily. Master card has an annual rate of 16.2% and is compounded quarterly. Which card offers the better deal and why? If both credit cards offered the same annual rate but still had different compounding periods, which would be the better deal (you do not need to show any calculations for this part)? Why?
Suppose you are considering investing in shares of Starbucks. Explain how each of the following situations would make you more or less willing to actually invest in the shares.
a) You expect the price of gold to depreciation.
b) The stock market becomes more volatile.
c) The bond market becomes less liquid.
d) Your salary increased by $50,000 last year.