User Account

All Pages

Opportunity cost of holding money

Assignment Help Business Economics
Reference no: EM132092057

1. The opportunity cost of holding money

Suppose you've just inherited $10,000 from a relative. You're trying to decide whether to put the $10,000 in a non-interest-bearing account so that you can use it whenever you want (that is, hold it as money) or to use it to buy a U.S. Treasury bond.

The opportunity cost of holding the inheritance as money depends on the interest rate on the bond.

For each of the interest rates in the following table, compute the opportunity cost of holding the $10,000 as money.

Interest Rate on Government Bond  Opportunity Cost

(Percent) (Dollars per year)

6 _______________

8 _______________

What does the previous analysis suggest about the market for money?

A) The quantity of money demanded increases as the interest rate rises.

B) The quantity of money demanded decreases as the interest rate rises.

C) The supply of money is independent of the interest rate.f the interest rate.

Reference no: EM132092057

Questions Cloud

Are these securities the bonds issued by the government : Are these securities the bonds issued by the government? Could you pls provide some examples?
Government debt and public debt : In terms of debt, what are the Foreign debt, government debt and public debt? What are the differences between them?
Design a logical and physical topographical layout : Design a logical and physical topographical layout of the current and planned network through the use of graphical tools in Microsoft Word or Visio.
Accommodate an employee religious conflict : An employer does not have to accommodate an employee's religious conflict if doing so would cause undue hardship, but there must be an attempt at accommodation.
Opportunity cost of holding money : Suppose you've just inherited $10,000 from a relative. You're trying to decide whether to put the $10,000 in a non-interest-bearing
Sexual harassment of employee by someone of the same gender : Sexual harassment of an employee by someone of the same gender is prohibited under Title VII of the Civil Rights Act of 1964
What is the profit maximizing quantity to produce : What is the profit maximizing quantity to produce? (Hint: solve for MC = MR or MC = $500 using your derived MC function.)
Writing communications for several purposes and audiences : Now that we have covered the "Principles," you have practiced writing communications for several purposes and audiences.
Why do industrial nations would invest : Why do industrial nations would invest in less-developed countries?

Reviews

Write a Review

Business Economics Questions & Answers

  Rival firm cuts its price-best strategic response of firm

When a rival firm cuts its price, the best strategic response of the firm, in many cases, is to retaliate with a price cut of its own. What practical advices or tactics would you provide to business executives as to what they can do that won’t land t..

  What is the opportunity cost of apples in terms of bananas

Home has 600 units of labor available. It can produce two goods, apples (QA) and bananas (QB). The unit labor requirement in apple production is 3, while it is 2 in banana production. Graph Home’s production possibilities frontier with the production..

  Tax goes from being medium tax to being large tax

Suppose the tax on liquor is increased so that the tax goes from being a "medium" tax to being a "large" tax. As a result, it is likely that:

  What will the magazine publisher do in the long-run

You are a magazine publisher. You are in the middle of a one-year rental contract for your factory that requires you to pay $400,000 per month, and you have contractual labor obligations of $1 million per month per the labor union agreement. If the e..

  Sellers drop out of the wedding photography business

Draw the demand and supply graph for each of the following situations: 1) Sellers drop out of the wedding photography business 2) Gas prices decrease 3) Fans become more supportive of pro soccer 4) Hockey fans experience a decline in income 5) A book..

  Aggregate demand and aggregate supply concepts

Utilize the dynamic aggregate demand and aggregate supply concepts, explain the macroeconomic factors that led to the 2007-2009 recession.

  Discuss how advertising affects consumer demand

Discuss how advertising affects consumer demand. Discuss how advertising affects consumer demand. Explain why fiscal policy might be needed. Explain how fiscal stimulus or restraint is achieved

  Proportion of obtaining a white male rat

What is the probability as a proportion of obtaining a white male rat?

  Foreign expatriates have difficulty doing business

One of the major reasons that foreign expatriates have difficulty doing business in the United States is that they do not understand American slang. For U.S. companies going abored for the first time, which forms of nonverbal communication barrier, w..

  Why do brides spend so much money on wedding dresses

Why do brides spend so much money on wedding dresses, whereas grooms often rent cheap tuxedos, even though grooms could potentially wear their tuxedos on many other occasions and brides will never wear their dresses again?

  What can we say about economies

The tax still needs to be approved by both houses of Congress and the process is enacted in the next period (t+1).If the only goal of the income tax is to maximize revenue, say, Revenue t = τYt. What can we say about economies A and B at time t (i..

  Double-breasting is legal under national labor relations act

Organized labor repeated its success in three previous presidential elections by delivering a very large majority of union members for Obama. The sit-down strike helped the CIO to obtain union membership in the 1930s, and it was soon approved by the ..

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!

Submit Assignment

Academics

Major Subjects

Majors

Get In Touch

whatsapp: +1-415-670-9521

Phone: +1-415-670-9521

Email: [email protected]

TERMS & POLICIES

HELP & SUPPORT

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