10 Questions and all 10 answers at the bottom, just need step by step explanations how to work out the problems for the coming up test. Thank you so much.

1) Suppose that a discount bond pays out $500 in exactly 2 years and has a price today of $453.51.Then the yield on this bond is?

2) A household has $5 in wealth and must allocate it between consumption C and savings S.The benefit of C is given by 2.9C0.5.At an interest rate of 23%, the household should optimally consume ___ and save ___.

3) A firm faces a Revenue function of 3.6K0.5, where K is capital invested.If this firm faces an interest rate of 45%, then the firm will optimally demand ____ units of capital and the resulting total revenue is ____.

4) Consider the same household and firm as given in questions 2 and 3 above, but assume they both face an interest rate of 0%.Determine whether the financial market is in equilibrium or not, and if not whether there is excess supply of funds, or excess demand.

5) Find the present value of a $5,600 cash flow that occurs three years from today, assuming the interest rate is 10%.

6) An investor purchases a discount bond for $5,000 and the bond has a future payout of $X in 5 years.If the interest rate is 10%, then what is the payout amount, X?

7) Suppose that there is a large increase in profitable business opportunities for firms.In this case we would expect that the _____ curve for bonds will shift to the _____ and the equilibrium price will _____.

8) In the market for bonds, buyers' wealth levels increase and government deficit spending decreases.Then the equilibrium yield for bonds will?

9) Suppose that liquidity of corporate bonds improves a little bit, relative to the liquidity of US Treasury bonds.In this case, the equilibrium price of corporate bonds should ____ and the equilibrium price of US Treasury bonds should _____.

10) If the risk of corporate bonds rises relative US Treasury bonds then we would expect that the yield for US Treasury bonds will _____ and the yield for corporate bonds will _____.

Answers on next page....

1. 5%

2. C = 1, S = 4

3. K = 2 and TR = $5.09

4. equilibrium

5. $4,207.36

6. $8,052.55

7. Supply; right; fall

8. Fall

9. Rise; fall

10.Fall; rise