PS1-Fall-10

PS1-Fall-10 - UNIVERSITY OF CALIFORNIA, DAVIS - DEPARTMENT...

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UNIVERSITY OF CALIFORNIA, DAVIS - DEPARTMENT OF ECONOMICS ECN 135: Money and Banking, FALL 2010 Problem Set 1 Notice: This problem set is due on Thursday October 7 th . Question 1: Some economists believe that one of the reasons that developing countries grow so slowly is that they do not have well-developed financial markets. State whether you agree with this argument in one paragraph. Question 2: Rank the following assets from most liquid to least liquid: a. Checking account deposits b. Currency c. Houses d. Saving deposits e. IBM stocks f. 6 month T-bills g. 3 month T-bills Question 3: You have won 10 million dollars in the lottery. You will be paid 1 million dollars now and 1 million dollars at the beginning of each of the following 9 years. If your discount (or interest) rate is 6% per year, how much have you really won (in the sense of present value)? Question 4: In order to buy a house, you take a 100,000 mortgage from the bank with an interest rate of 6% (per year). What is the yearly payment to the
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PS1-Fall-10 - UNIVERSITY OF CALIFORNIA, DAVIS - DEPARTMENT...

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