In the financial markets and Institutions, the most important two are interest rates. The interest rate...

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In the financial markets and Institutions, the most important two are interest rates. The interest rate charged, changes in interest rates influence the performance and decision making of suppliers of funds and users of funds. b) c) d) i) ii) a) Explain:- i) 2) 3) 4) 5) 6) Page 2 of 4 (4 ½ marks) 1) 2) 3) Nominal interest rates Loanable funds theory Supply loanable funds Demand for Loanable funds Equilibrium Interest Rate Factors that cause the Supply and Demand Curves for Loanable funds to shift 7) Factors that affect Nominal Interest Rates Explain the theories that explain the shapes of yield curve Explain:- (3 marks) (1½% marks) Forward rate Compound Interest Simple Interest Dundahead has £1000 that he has received annual bonus from his employer. He would like to invest this money for a period of two years. Currently default risk free one year securities are paying a 12% Interest rate per year on the last day of each of the two years over the Investment horizon. Assuming Dundahead will not reinvest the annual interest, calculate the value of the investment at the end of the first year and the second year. (3 marks) Assuming Dundahead reinvests the annual interest rate, calculate the value of the investment at the end of the first year and second year.. (3 marks) In the financial markets and Institutions, the most important two are interest rates. The interest rate charged, changes in interest rates influence the performance and decision making of suppliers of funds and users of funds. b) c) d) i) ii) a) Explain:- i) 2) 3) 4) 5) 6) Page 2 of 4 (4 ½ marks) 1) 2) 3) Nominal interest rates Loanable funds theory Supply loanable funds Demand for Loanable funds Equilibrium Interest Rate Factors that cause the Supply and Demand Curves for Loanable funds to shift 7) Factors that affect Nominal Interest Rates Explain the theories that explain the shapes of yield curve Explain:- (3 marks) (1½% marks) Forward rate Compound Interest Simple Interest Dundahead has £1000 that he has received annual bonus from his employer. He would like to invest this money for a period of two years. Currently default risk free one year securities are paying a 12% Interest rate per year on the last day of each of the two years over the Investment horizon. Assuming Dundahead will not reinvest the annual interest, calculate the value of the investment at the end of the first year and the second year. (3 marks) Assuming Dundahead reinvests the annual interest rate, calculate the value of the investment at the end of the first year and second year.. (3 marks)

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a i Nominal Interest Rates Nominal interest rates also known as stated or quoted interest rates represent the explicit cost of borrowing or the return on investment without accounting for inflation Th... View the full answer