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In medieval times, goldsmiths would often offer to store gold in return for a fee. They provided anyone depositing gold with a warehouse receipt, which represented a legal claim on the goldsmith to exchange the receipt for the amount of gold written on it.
a. How are the medieval goldsmiths like modern banks, and how are they unlike modern banks?
b. Is multiple deposit creation possible in this system? Does your answer depend on whether the warehouse receipts can be bought and sold and redeemed by someone other than the person who deposited the gold?
You have $10,000 to invest and you are considering investing in a fund. The fund charges a front-end load of 5.75% and an annual expense fee of 1.25% of the average asset value over the year. You believe the fund's gross rate of return will be 11% pe..
Would you expect the federal government's demand for loanable funds to be more or less interest-elastic than household demand for loanable funds? Why?
Mildred's Tavern Corp pays an annual dividend rate of 11.80% on its preferred stock that currently returns 15.81% and has a par value of $100.00. What is the value of Mildred's Tavern Corp's stock?
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Sundar has just purchased a house in Melbourne, at a total cost of $1,000,000. He has saved up a deposit of $200,000 towards this amount, and is covering the balance using a mortgage from ROOMS Home Loans. Calculate Sundar’s monthly repayments over t..
Consider the following two mutually exclusive projects: Year Cash Flow (X) Cash Flow (Y) 0 –$ 20,500 –$ 20,500 1 8,975 10,350 2 9,350 7,925 3 8,925 8,825 Calculate the IRR for each project. What is the crossover rate for these two projects?
The Raven Co. has just gone public. Under a firm commitment agreement, Raven received $17.30 for each of the 15 million shares sold. The initial offering price was $21.00 per share, and the stock rose to $23.40 per share in the first few minutes of t..
Discuss the concept of a zero cost collar and its usefulness. With the aid of a suitable example, illustrate how it works. Compare the use of covered calls and protective puts to managing risk exposure to individual securities.
Star Light & Power increases its dividend 2.9 percent per year every year. This utility is valued using a discount rate of 9 percent, and the stock currently sells for $52 per share. If you buy a share of stock today and hold on to it for at least th..
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