Question

14. Money market assets typically are: a. for 20 years d. all of the above b. tax free e. none of the above C. sold at a discount with the capital gain the interest 15. Most businesses get funds by: a. issuing stock d. all of the above b. borrowing from banks e. none of the above c. raising funds in the corporate bond market 16. When you lend money, you don't earn interest unless: a. you have a promise to pay d. all of the above b. you are tax exempt e. none of the above c. you first get all of your loaned money back 17. If the market rate of interest is 5% and the expected inflation rate is 2% then the real rate of interest is about: a. -3% d. 10% b. 3% e. none of the above c. 7% Figure 1 Assets Liabilities $75,000 (excess reserves) $25,000 (required reserves) $100,000 (deposit) —

Answer 1

ANSWER 14 E) money market assets are not for more than one year , they can be either tax free or taxable and their is no compulsion that it will be sold at discount

ANSWER 15 D) most businesses raise funds through issuing stocks through an IPO , taking loans from bank or borrowing through bonds and paying fixed interest till maturity

ANSWER 16 E) you dont need a promise to get interest earned, interest earned is always taxable also people earn money periodically not on maturity on maturity u get loan and interest both back.

ANSWER 17 B) Real rate of interest = market interest - inflation

= 5%-2%

=3%