Explain the effects of unexpected increase in inflation rate

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Assignment: Answers 5 questions out of 6. 125-150 words for each one is fine. some are graphs questions. Draw neat graph. No Plagiarism

1. Briefly describe the difference in the bond market in general and the stock market in the context of investment and return. Why is corporate bond investment usually riskier than investing in US Treasury securities?

2. During a recession, the yield for corporate bonds tends to increase and the yield for US Treasury securities tends to decrease. Briefly explain why. Give a real-world example as part of your reasoning.

3. Estimate the rate of return (yield to maturity) if you as an investor purchase a one-year US TN at the market price of $955 with an FV of $1,000. Make sure you show the numerical estimation by using the yield equation.

4. Draw a hypothetical demand and supply curve for S&P 500 stocks and briefly explain the effects of unexpected increase in inflation rate caused by a sudden rise in energy prices.

5. Draw a demand and supply curve of the loanable funds market and explain the effects on equilibrium prices and quantities of loanable funds in response to the situation described in Q4

6. Suppose the increase in tariffs on imports of goods and services from China and EU countries caused a capital flight of currency from the United States. Show the effects this would have on US exports, imports, and trade balances.

Reference no: EM132541181

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