Can the nominal interest rate ever be negative

Assignment Help Microeconomics

Reference no: EM13900691

Nominal and real interest rates around the world

a. Can the nominal interest rate ever be negative? Explain.

b. Can the real interest rate ever be negative? Under what circumstances can it be negative? If so, why not just hold cash instead of bonds?

c. What are the effects of a negative real interest rate on bor- rowing and lending?

d. Find a recent issue of The Economist and look at the tables in the back (titled "Economic Indicators" and "Financial Indicators"). Use the three-month money market rate as the nominal interest rate, and the most recent three- month rate of change in consumer prices as the expected rate of inflation (both are in annual terms). Which coun- tries have the lowest nominal interest rates? Which coun- tries have the lowest real interest rates? Are these real interest rates close to being negative?

Reference no: EM13900691

Questions Cloud

What impact does positive leverage have on the rate earned : What impact does positive leverage have on the rate earned on stockholders' equity compared to the rate earned on total assets?

What is expected present discounted value of each of plans : What is the expected present discounted value of each of these plans if the interest rate is 1%? 10% and Which plan would you choose in each case?

How mental set have played role in marias academic problem : Maria's method of studying worked effectively throughout high school until she took her first foreign language course. In this course, her grades were much lower than usual. How might mental set have played a role in Maria's academic problem

Potential risks from chemicals and technologies : In regards to Precautionary Principle should we rely more on the use of the precautionary principle to implement pollution prevention as a way to reduce the potential risks from chemicals and technologies? Why or Why not?

Can the nominal interest rate ever be negative : Can the nominal interest rate ever be negative? Explain.and Can the real interest rate ever be negative? Under what circumstances can it be negative? If so, why not just hold cash instead of bonds?

What is the dupont formula : What is the DuPont formula? What does an increase in the number of days' sales in receivables ordinarily indicate about the credit and collection policy of the firm?

Turner roth and lowe are partners who share : 1.Turner, Roth, and Lowe are partners who share income and loss in a 1:4:5 ratio.

What measure is used by stockholders to assess profitability : What measure is used by stockholders to assess the profitability of the firm? What measure is used by managers in assessing the profitability of the firm?

Addressed using the perl scripting language : addressed using the Perl Scripting Language.

User Account

All Pages