Real Interest Rates Movement of Capital and Banking Problems Assignment these are some finance homework problems and some do require some calculations so o

Real Interest Rates Movement of Capital and Banking Problems Assignment these are some finance homework problems and some do require some calculations so only bid if you know how to complete them and have some idea of finance and accounting.Chapter 6numerical exercise # 12 eal
Why?
ner a
the loan was 4 percent; actual inflation over
the year turned out to be 3 percent.
d The nominal interest rate on a loan was
8 percent; the expected real interest rate on
the loan was 5 percent; actual inflation over
the year turned out to be 3 percent.
12 Suppose that the demand for and supply of bonds
both change with the state of the business cycle.
In economic expansions, the demand for bonds is
given by the equation
D= 200 + 2,000r
use
rears.
ime?
ncing
and the supply of bonds is
S= 500 – 1,000r
rates
the
where r is the expected real interest rate.
In recessions, however, both the demand for and
supply of bonds is lower:
rates
tem
rate?
e tax
gov-
r?
must
nges
tax
D= 150 + 2,000r
S= 300 – 1,000r
a Given these equations, what is the equilib-
rium expected real interest rate in economic
expansions?
b Given these equations, what is the equilibrium
expected real interest rate in recessions?
c If the expected inflation rate is 4 percent in
economic expansions, what is the equilibrium
nominal interest rate in economic expansions?
d If the expected inflation rate is 2 percent in
recessions, what is the equilibrium nominal
interest rate in recessions?
13 Suppose that the Fisher hypothesis holds for an
economy that has an expected real interest rate of
2 percent. For each of the expected inflation rates
of 0, 2, 4, 6, and 8 percent, calculate the nominal
interest rate and the after-tax expected real inter-
minate
em.
te the
?
whether
off, or
ation.
+

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