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- This topic has 5 replies, 2 voices, and was last updated 2 weeks ago by LMR1006.
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- August 23, 2016 at 1:54 pm #334744
Hi sir, in my lectures notes, i came across one question that expressed the forward rate in the following manner .
One month forward rate: ($ per €)
1.7829 +- 0.0003What does this mean ? So how do we know which is the smaller figure and the bigger figure ?
August 23, 2016 at 4:38 pm #334765Why are the following statements incorrect ?
Statement 1 : Governments can keep interest rates low by buying short dated government bills in the money market.
Statement 2 : Expectations theory states that future interest rate reflect expectations of future inflation rate movements.
The 2nd statment is incorrect because it has got no link to Expectations theory right ? What about the 1st statement ?
August 24, 2016 at 6:33 am #334833First question:
I deal with this in my lectures.
The two rates are 1.7829 – 0.003, and 1.7829 + 0.003.
It is then obvious which is smaller and which is bigger 🙂Second question:
Whether or not the government buys bills in the market, has nothing to do with expectations.August 25, 2016 at 1:46 pm #335147Okay thank you .
November 8, 2024 at 12:59 pm #713129HI SIR, GOOD EVENING.
Which TWO of the following statements are correct?
A.Governments can keep interest rates low by purchasing short-dated government bills in the money market
B.The normal yield curve slopes upward to reflect increasing compensation to investors for being unable to use their cash now
C.The yield on long-term loan notes is lower than the yield on short-term loan notes because long-term debt is less risky for an investor than short-term debt
D.Expectations theory states that future interest rates reflect expectations of future inflation rate movementsACCA HUB ANSWER IS: The correct answer is A and B.
Tutorial note: If the government buys treasury bills, their market price rises and the yield (market interest rate) falls. Liquidity preference theory explains a “normal” upward sloping yield curve.
MAY YOU PLEASE GUIDE ME ON THIS QUESTION. THAK YOU
November 8, 2024 at 5:47 pm #713135Governments can keep interest rates low by purchasing short-dated government bills in the money market. This is because when the government buys these bills, their market price increases, leading to a decrease in yield.
The normal yield curve slopes upward to reflect increasing compensation to investors for being unable to use their cash now.
This is explained by liquidity preference theory, which indicates that yields need to rise as the term to maturity increases, compensating investors for deferring the use of their cash. - AuthorPosts
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