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Unformatted text preview: ) short term PV $1000 1 05 5 PV=$783.53 • = /( +. ) short term PV $1000 1 03 5 PV=$862.61 • = /( +. ) long term PV $1000 1 05 30 PV=$231.38 • = /( +. ) long term PV $1000 1 03 30 PV=$411.99 2. If a new FED chair is appointed who believes in a slower growth rate of money then less money will be available to banks. This will cause an increase in interest rates and a decrease in the present value of bonds. 3. With a yield curve like this one it can be inferred that interest rates have been falling or are expected to fall and the bond market is expected to pick up for a time. We can also infer that long term bonds will do better. The fall toward the end that the fall in interest rates is believed to be temporary. •...
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This note was uploaded on 05/04/2008 for the course ECN 334 taught by Professor Ladaro during the Spring '08 term at Rhode Island.
- Spring '08