The context of the liquidity preference model

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1. Finding Payments: You just purchased a brand new tractor for $225,000. If you secured a 4.5% interest rate that is compounded monthly and want to have this tractor paid off in 10 years, what are your monthly payments?

a. Calculate the cash flow using Excel’s functions.

2. What is the significance and meaning of quantitative easing in the context of the liquidity preference model (increase in the quantity of money supplied).

3. Given a currency pair, what happens to the exchange rate if the foreign exchange market is in disequilibrium? Does it matter if the exchange rate is above or below the equilibrium rate? Understand what market forces drive the exchange rate back to equilibrium in both cases, whether or not the cases are different.

Reference no: EM131962778

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