Use the following table to represent spot rates. Calculate the total future value at time 5 of a payment of $3000 made today and a payment of $3000 made at time 3. Assume that the payment at time 3 will be invested at today’s forward rates.
Term(years) Annual yield
1 6.00%
2 6.10%
3 6.40%
4 6.8%
5 7.50%
2. Supply Shocks Which one of the following is a positive supply shock for the U.S. economy?
The new cap and trade law raises energy costs by 15%.
Major disruption of oil supplies in the Middle East.
New technological developments spurred on by investment tax credits result in large productivity increases.
The U.S. labor force becomes increasingly unionized.