If the equilibrium interest rate in the money market is 5%, then at an interest rate of 2% sellers of interest-bearing financial assets _____ interest rates to find willing buyers. Sales of financial assets do not depend on the rate offered. must offer higher can offer 2% can offer lower

Answers

Answer 1

Answer: must offer higher

Explanation:

The financial world of investment is inter-correlated and products can sometimes be substitutes for one another. What this means is that if one financial product is not offering enough return on investment or is risky or for any other reason shakes their confidence in it, then investors tend to run to financial products that are perceived as better.

This is why when interest rates are stable and stocks are volatile, stock markets tend to lose value and bond markets sometimes gain value as investors leave the stock market and come to the bond market.

In the scenario described, the interest rate in the money market is 5%. If interest bearing financial assets are only at 2%, investors will leave/ not invest in those interest bearing bonds because the rate is lower. The sellers of such assets will therefore have to make them more attractive by increasing the the interest rates to find willing buyers.


Related Questions

Determining Cash Payments to Stockholders The board of directors declared cash dividends totaling $209,800 during the current year. The comparative balance sheet indicates dividends payable of $50,400 at the beginning of the year and $45,400 at the end of the year. What was the amount of cash payments to stockholders during the year?

Answers

Answer:

  $214,800

Explanation:

The amount paid is the sum of the amount declared and the difference in amounts payable.

  dividends paid = $209,800 +50,400 -45,400

  dividends paid = $214,800

Listening skills are important for career success and organizational effectiveness. Considered one of the soft skills, listening skills allow you to improve the effectiveness of your communication with supervisors, colleagues, and customers. To become a more powerful listener, you can employ a variety of techniques. For example, if you're having trouble focusing on a message, you could_______________

Answers

Answer:

Identify the key facts in the message.

Explanation:

Listening skills are important for career success and organizational effectiveness. Considered one of the soft skills, listening skills allow you to improve the effectiveness of your communication with supervisors, colleagues, and customers. To become a more powerful listener, you can employ a variety of techniques.

For example, if you're having trouble focusing on a message, you could identify the key facts contained in that message.

Identifying the key facts implies, you will objectively pick the truths contained therein, as well as high and salient points of the message.

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