Question

The course name is Econ364 Money and Baking.

Discuss following until September 29th:

chapter 3, page 60-61, # 5, and 12 5.      Most of the time it is quite difficult to separate the three functions of money. Money performs its three functions at all times, but sometimes we can stress one in particular. For each of the following situations, identify which function of money is emphasized. a.      Brooke accepts money in exchange for performing her daily tasks at her office, since she knows she can use that money to buy goods and services. b.      Tim wants to calculate the relative value of oranges and apples, and therefore checks the price per pound of each of these goods as quoted in currency units. c.       Maria is currently pregnant. She expects her expenditures to increase in the future and decides to increase the balance in her savings account. 12. Rank the following assets from most liquid to least liquid: a.      Checking account deposits b.      Houses c.       Currency d.      Automobiles e.       Savings deposits f.        Common stock chapter 4, page 83, # 2 and 4 1. Write down the formula that is used to calculate the yield to maturity on a twenty-year 10% coupon bond with a $1,000 face value that sells for $2,000 2. Explain which information you would need to take into consideration when deciding to receive $5,000 today or $5,500 one year from today. 4. Do bondholders fare better when the yield to maturity increases or when it decreases? Why?

Answer 1

Question 5

(a)

In this scenario, person is using money to sell and purchases goods and services.

Thus, medium of exchange function of money is emphasized.

(b)

In this scenario, person is using money to ascertain price of goods.

Thus, unit of account function of money is emphasized.

(c)

In this scenario, money is being kept for future use.

Thus, store of value function of money is emphasized.

Question 12

Most liquid asset is that which can be converted into money in most easiest manner.

Least liquid asset is that which can be converted into money in most difficult manner.

The most liquid to least liquid assets are as follows -

Currency

Checking account deposits

Saving deposits

Common stock

Automobiles

Houses