Question

1. What do financial markets sell?

2. Write an expression for the present value of the future damage from climate change. What happens to the present value if the discount rate is higher? Does this explain why some ignore the dangers of climate change?

Answer #1

q1) financial markets is a platform for buying and selling of shares & securities. it can sell stocks, t-bills, govt bonds, commerical paper, collateralised borrowing debt obligation, certificate of deposit ,etc either through money market or through capital market .

q2) pv of the future damage from climate change cant be formulated. this is because the damage cant be quantified and it is uncertain. hence we can at the most bet through complex derivatives.

Answer the following questions: What happens to the future value
of some fixed dollar amount invested today as the interest rate
decreases? Why? What happens to the present value of some fixed
dollar amount to be received in the future as the interest rate
increases? Why? What happens to the present value of some fixed
dollar amount to be received in the future as the time to receive
the money decreases? Why? Which will have a higher present value,
assuming...

The following questions relate to the concept of present
value.
a. Find the present value of $1000 to be paid 3 years in the future
if the interest rate is 5%.
b. Find the present value of $1000 to be paid in 5 years in the
future if the interest rate is 5%?
c. What do you notice about the relationship between time and
present value? The further into the future a payment (or event)
occurs, what happens to the...

1) Please explain what is present value, and come up with one
example of the present value application in real life.
2) What happens to present value when you increase the discount
rate?
3) Please contrast compounding and discounting.

what does present value really tell us ? if the discount rate is
higher why would the pv be lower ?

How do you solve - What is the present value of $2,100 a year at
a discount rate of 8% if the first payment is received 7 years from
now and you receive a total of 23 annual payments? - using a
financial calculator?

True or False: and why
1-Money markets are used to buy and sell assets that are
short-term in duration but higher risk than ordinary assets.
2-Banks do not have the same financial ratios as other
companies.
3-Liquidity risk is the probability that a bank will not be able
to pay its interest expenses.
4-Net interest margin is the difference between the yield on a
government security and the rate on loans issued by a bank.

1.Why does a bond sell at premium?
2. why does a bond sell at discount?
3. What are two terms for “ interest rate” as it pertains to
bonds?
4. What is a bond?

Suppose the markets change their expectations of the future
value of the dollar, such that they expect it to be stronger at
that time in the future than their expectation was previously
(i.e., Ee decreases). How would this change in expectations affect
spot exchange rates assuming interest rates stay constant? What
would the central bank have to do to keep the spot rate from
changing in the manner you described in part (a)?

1. Please explain the concept of Present Value and Future Value.
Why would you think these calculations are important?
2. What is the Net Present Value of an investment? Why is this
important to understand? Why Use Net Present Value?

1. How does an increase in interest rates affect the present
value of a future payment?
2. How does an increase in the size of a future payment affect
the present value of a future payment?
3. Two payments of $1,000 are to be made. One of them will be
paid one year from today and the other will be paid two years from
today. Which has the greater present value? Why?

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