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From the text Web site, connect to the St. Louis Fed site for data on (1) nominal GDP and (2) interest rates on 3-month Treasury bills. Link to sweepmeasures.com for data on M1 adjusted for sweep accounts (use the series labeled M1RS).
a. Using these data, compute the velocity of money for each year from 1980 to the present. Make a graph showing velocity and the T-bill rate over time.
b. Does velocity fluctuate from year to year? What might explain these movements?
c. What is the long-run trend in velocity? What might explain this trend?
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Why is the time value of money important for an individual to understand in regard to their private life? What can an individual do with this information?
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Catalina Bank (CB) currently pays a dividend of $2.75 per share. T-bills are paying a 1.45% return and the market is anticipated to earn 9.65% per year. AAS has a beta of 1.32 and retains 60% of their earnings every year. What is the cost of equity (..
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