Question

Suppose that China and the Oil Exporting countries announce that they will each sell 30% of...

Suppose that China and the Oil Exporting countries announce that they will each sell 30% of their investment in US government bonds. All other things equal, you would expect that:

a. bond prices in the US would rise and the US interest rate would fall

b. bond prices in the US would fall and US interest rates would rise.

c. bond prices and interest rates would both decline

d. bond prices and interest rates would both rise

What is the current exchange rate between the Chinese Renminbi and USD__________?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

When China and other oil exporting countries announced that they will sell 30% of each of their investment in US Government Bonds, it will definitely lead to reduction in the value of Government Bonds because the major countries are selling at as they are sceptical of the credit risk associated with it.

It can have a negative impact on the bond price and interest rates as well.

Correct answer would be option

(C)bond prices and interest rates would both decline

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Suppose you work for a US based soybean manufacturing company which supplies soybeans to other countries,...
Suppose you work for a US based soybean manufacturing company which supplies soybeans to other countries, among which are China and Nigeria. From your company’s sales records, China is responsible for 80% of your company’s global sales and Nigeria is responsible for 0.2% of your company’s sales. Your contract with the companies in both countries has just expired and the week before negotiations are set to start, it is announced that tariffs have been placed on soybeans in both countries....
Suppose the U.S. Treasury announces plans to issue $50 billion of new bonds. Assuming the announcement...
Suppose the U.S. Treasury announces plans to issue $50 billion of new bonds. Assuming the announcement was not expected, what effect, other things held constant, would that have on bond prices and interest rates? a. Prices and interest rates would both decline. b. Prices would decline and interest rates would rise. c. Prices would rise and interest rates would decline. d. Prices and interest rates would both rise. e. There would be no changes in either prices or interest rates.
Early in the 21st century, China accumulated about $2 trillion in US government Debt. I remember...
Early in the 21st century, China accumulated about $2 trillion in US government Debt. I remember during that time so called “experts” suggested that meant China had some ability to influence US policy since it owned so much debt it could inflict great damage to the US economy if they were to sell that debt onto the market suddenly and stop buying any more US debt. That never happened. Let’s speculate though and ask if China did sell all that...
multiple choice question Q2)A business man travels to China on a regular basis and stays in...
multiple choice question Q2)A business man travels to China on a regular basis and stays in the same hotel. After conversion in US dollars, the price of the hotel room has been falling, You conclude that a)The US dollar has appreciated against the Chinese yuan b)The US dollar has gained value against all other currencies c).The US dollar has depreciated against the Chinese yuan Q3)In April 2018, the exchange rate between the US Dollar and the euro is 1 euro...
Explain why you would be more or less willing to buy long-term PepsiCo bonds under the...
Explain why you would be more or less willing to buy long-term PepsiCo bonds under the following circumstances: a) Brokerage commissions on stocks fall b) You expect interest rates to rise c) Brokerage commissions on bonds fall. d) Trading in PepsiCo bonds increases, making them easier to sell e) You expect a bear market in stocks (stock prices are expected to decline)
1. Suppose the inflation rate in Mexico decreases relative to the US. We would predict that:...
1. Suppose the inflation rate in Mexico decreases relative to the US. We would predict that: A. The exchange rate of Dollars/Peso would rise and the equilibrium amount of Pesos would rise. B. The exchange rate of Dollars/Peso would fall and the equilibrium amount of Pesos would rise. C. The exchange rate of Dollars/Peso would fall and the equilibrium amount of Pesos would fall. D. The exchange rate of Dollars/Peso would rise and the equilibrium amount of Pesos would rise,...
1.Suppose that the interest rates paid on corporate bonds are currently 8%, but you expect them...
1.Suppose that the interest rates paid on corporate bonds are currently 8%, but you expect them to fall moderately in the near future. If your expectation is correct, buying bonds today would be wise because: (a)lower rates make bonds less risky. (b)stocks are a bad investment because their prices are likely to fall when rates fall. (c)falling rates will make the market value of the 8% bonds rise, giving you the potential to profit from capital gains. (d)these bonds are...
a. Monetary Policy involves changing taxes and government spending/ the design of currency/ exports/ the money...
a. Monetary Policy involves changing taxes and government spending/ the design of currency/ exports/ the money supply.   In the United States, Monetary Policy is implemented by the Federal Reserve/ President and Congress/ Secretary of the Treasury/ states. b. Contractionary Monetary Policy/ Lower prices/ Expansionary MonetaryPolicy/ Larger coins can be used to address a Recessionary Gap; while Expansionary MonetaryPolicy/ smaller coins/ Contractionary Monetary Policy/ higher prices can be used to address an Inflationary Gap. c.  To enact Contractionary Monetary Policy, the central bank...
There is an inverse relationship between bond prices and yields. This inverse relationship will be demonstrated...
There is an inverse relationship between bond prices and yields. This inverse relationship will be demonstrated by calculating bond prices to show that interest rates move inversely: if yields rise, then bond prices fall. Bonds will be sold either at a premium or a discount. With this in mind respond to the following question. You currently own a 30 year Treasury Bond paying a 4% annual coupon rate. The market interest rates for like securities rose to 5%. Would your...
This year the government of Bangladesh has introduced a fiscal stimulus package that significantly increases public...
This year the government of Bangladesh has introduced a fiscal stimulus package that significantly increases public expenditure. Because the government has problems borrowing in domestic and international credit markets these days, it asks the Central Bank of Bangladesh to print money and buy government bonds, so that the government will have sufficient money to spend. Assume that the exchange rate is flexible and that the interest parity condition holds. Also, assume that the price level is exogenously determined and the...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT