Question 1. What happens to Bond prices, quantities and interest rates if (Make sure to include the supply and demand graph for bonds for each question:
a) Increase in wealth
b) Increase in risk
c) Increase in liquidity
Question 2. Calculate the real interest rate over the past 24 months using the 30 year Treasury bond rate as the nominal interest rate and assuming that expected inflation was equal to actual inflation (based on the change in CPI). Make sure to include the Fisher Equation.
Question 3. Explain 3 of the 8 basic facts and what it means for our financial markets.
Question 4. What happens to exchange rates and why if there is:
a) a reduction in productivity
b) an increase in trade restrictions
c) a fall in prices
Question 5. What happens to the value of the Euro as the Greek Debt crises spills over to Spain, Italy, Portugal, and Ireland?
Question 6. In your own words explain how a floating exchange rate works.
Question 7. Give and explain 2 types of credit market instruments.
Question 8. What happens to the supply and demand for money and the price (interest rates) and the quantity of money if there is (make sure to include the money graph for each question):
a) a fall in income
b) an increase in prices
c) a reduction in the money supply