Compare the behavior of the interest rate

Assignment Help Financial Management
Reference no: EM131221803

Consider a variation on the Taylor rule:

where r is the real interest rate in a quarter, r TAYLOR is the interest rate implied by the Taylor rule, and r(-1) is the interest rate in the previous quarter. Call this rule TR-S.

a. Compare the behavior of the interest rate under TR-S to its behavior under the basic Taylor rule.

b. Is TR-S a realistic description of central banks' behavior? Why might they follow such a rule rather than the basic Taylor rule?

Reference no: EM131221803

Questions Cloud

Discuss the reasons for heather poor performance : Discuss the reasons for Heather's poor performance (e.g. Is it a deficiency in declarative knowledge or procedural knowledge?). Recommend how to remedy the situation.
In addition to the actual financial statements : In addition to the actual financial statements, in an annual report of a public company there is the management discussion and analysis, the notes to the financial statements and the auditors report. Describe the purpose of each, and in your opinion ..
Sales and contribution margin ratios for the three products : Darth Company sells three products. Sales and contribution margin ratios for the three products follow: Product X Product Y Product Z Sales in dollars $ 40,000 $ 80,000 $ 200,000 respectively and Contribution margin ratio 35% 30% 25% respectively. Gi..
Designing and building a database application : Design and implement a relational database using a database management system - utilise a query language tools and techniques to obtain data and information from a database.
Compare the behavior of the interest rate : Compare the behavior of the interest rate under TR-S to its behavior under the basic Taylor rule. - Is TR-S a realistic description of central banks' behavior?
Contracting and bronson construction pay : Assume that both Archer Contracting and Bronson Construction pay their employees $18 an hour and each employee works 8 hours per day. Calculate the multifactor productivity of each firm. Now who is the most productive and what is the percent diffe..
Describe the five stages of the negotiation process : In the decision-making process, you must take into account several cultural variables. Describe one of the variables associated with risk tolerance and one of the variables associated with internal/external focus of control. Why are these importan..
Compute the availability of machine : A machine can operate for an average of 14 weeks before it needs to be overhauled, a process which takes 7 days. The machine is operated 6 days a week. Compute the availability of this machine.
How will the central bank adjust the interest rate : How will the central bank adjust the interest rate if it wants to keep output at potential? - What will really happen to output?

Reviews

Write a Review

Financial Management Questions & Answers

  Find the price of apartment that royal birkdale should pay

Royal Birkdale Company is interested in buying an apartment and renting it out for $12,000 a year, collecting the rent in advance each year. Royal Birkdale will depreciate the apartment over 20 years, but sell it after 5 years at a price, which is 20..

  What is the annual total costs of post card inventory

Cheeseburger and Taco Company purchases 12,465 boxes of cheese each year. It costs $30 to place and ship each order and $8.43 per year for each box held as inventory. The company is using Economic Order Quantity model in placing the orders. What is t..

  The current spot exchange rate

The current spot exchange rate is $1.55 = €1.00 and the three-month forward rate is $1.60 = €1.00. Consider a three-month American call option on €62,500 with a strike price of $1.50 = €1.00. If you pay an option premium of $5,000 to buy this call, a..

  Firm use to discount the projects cash flows

Titan Mining Corporation has 9.2 million shares of common stock outstanding, 360,000 shares of 5 percent preferred stock outstanding, and 190,000 8.0 percent semiannual bonds outstanding, par value $1,000 each. what rate should the firm use to discou..

  A regional bank has decided to open an office overseas for

a regional bank has decided to open an office overseas for serving those businesses that are expanding internationally.

  Dividends tend to fluctuate in direct relation to changes

Based on the dividend growth model, the price of a stock will remain constant if the dividend is cut, provided that the: Dividends tend to fluctuate in direct relation to changes in annual earnings. Managers are less concerned with the change in the ..

  Explain the relationship between npv and a firms value

Explain the relationship between NPV and a firm's value. What is the cost of capital? What role does it play in capital investment decisions?

  What is the average return of the stock over the four years

Over the past four years, a stock produced returns of 15 percent, 6 percent, 11 percent, and 22 percent, respectively. A) What is the average return of the stock over the four years? B) What is it's standard deviation? C) What range of returns would ..

  Find the break-even points in units-sales break-even point

The Kenergy Company is planning to manufacture and sell electronic alarm clocks.  Raw materials for each clock will be $3 and direct labor per clock will amount  of $6.  Fixed administrative overhead costs will amount to $24,000.  The clocks are expe..

  Compare gulf controls with the average firm in the industry

Compare Gulf Controls with the average firm in the industry. What is the source of the major differences between the Gulf and the industry average  ratios?

  The research department has developed new product

Tharp Company operates a small factory in which it manufactures two products: C and D. Production and sales results for last year were as follows. The research department has developed a new product (E) as a replacement for product D. Market studies ..

  Semi annual compounding

You just purchased a hom eand taken out a $410,000 mortgage. The mortgage has a 30 year term with monthly payments and an APR (with semi annual compounding) of 7.52%.  How much will you pay in interest, and how much will you pay in principle, during ..

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd