Explain relationship between interest rate and bond price, Financial Accounting

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1. Would export businesses prefer a rising or declining dollar? Would it be the same for a European tourist on a budget and visiting the Grand Canyon? Explain your answer.

2. What are 4 ways that the FED can use to create money? What are the most powerful one and what method the FED to create a gradual easing of the money supply either created or destroyed most often uses?

3. What is the meaning of the following: a stock option price, strike price and what are a put and a call?What is the advantage or disadvantage of purchasing stock options over stocks? What function do Mutual Funds play with Stock Market investments?

4. What is the difference between the discount rate, prime rate and the subprime rates of interest? Which interest rate in particular created the 2008 recession? Explain how that happened.

5. What is the difference between the FED targeting the interest rate vs. inflation and which one is Bernanke using today? Name a few countries that use this method today.

6. Give a brief history of how banking evolved into a sophisticated operation. Begin first with the Goldsmith and sum up with the Banking system that we experience today.

7. During the 1980 period, what did the FED Chairman Paul Volcker do to reduce double digit inflation of the 1970's? What was the name of the person and or the economic school's approach that Volcker used?

8. What is the relationship between the interest rate and bond prices? Is there any difference between T-Bills vs. Corporate bonds in reaching your assessment? When the stock market falls, where do you suppose that most investor place their money and why?

9. How does the FED use the bond market to create and destroy money? Which method do developed countries employ to reduce the chance of experiencing inflation? What about Banana Republicans and inflation, do they have this means available to them?


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