Suppose that there is a small open economy named B in this world, and households in...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Suppose that there is a small open economy named B in this world, and households in this country trade financial assets in the international financial markets. On the contrary to households in the country A, households in country B are risk-neutral, with a period utility function of u(ct) = ct. Time also runs for two periods: t=1,2 and YB, YB are incomes for country B at t=1 and t=2, respectively. The time discount factor for households B, B is also one. Finally, BB = 0. = 1. (10 points) YB 1 and Y₂B = 1.2. In which range of the world interest rate r₁, do households in the country B become lenders at t=1? In which range of the world interest rate ri do households in the country B become borrowers at t=1? For this question only, you can ignore multiple solutions. 2. (10 points) In the case that households B become lenders at t=1, what are TBB and CAB? 3. (10 points) Find r₁ such that the households are indifferent between having access to the international financial market or not. Suppose that there is a small open economy named B in this world, and households in this country trade financial assets in the international financial markets. On the contrary to households in the country A, households in country B are risk-neutral, with a period utility function of u(ct) = ct. Time also runs for two periods: t=1,2 and YB, YB are incomes for country B at t=1 and t=2, respectively. The time discount factor for households B, B is also one. Finally, BB = 0. = 1. (10 points) YB 1 and Y₂B = 1.2. In which range of the world interest rate r₁, do households in the country B become lenders at t=1? In which range of the world interest rate ri do households in the country B become borrowers at t=1? For this question only, you can ignore multiple solutions. 2. (10 points) In the case that households B become lenders at t=1, what are TBB and CAB? 3. (10 points) Find r₁ such that the households are indifferent between having access to the international financial market or not.
Expert Answer:
Answer rating: 100% (QA)
1 If the world interest rate r1 is less than 02 households in country ... View the full answer
Related Book For
Posted Date:
Students also viewed these economics questions
-
1.(16 points total.) Todd is considering two risky stocks A and B, and their probability distributions are: Expected ReturnStandard Deviation A0.250.40 B0.150.20 The correlation coefficient between A...
-
Julia and John are two friends that formed a partnership which will start operations at the end of 2021. They are going to sell a type of cosmetics product. For 2022 their condensed budgeted income...
-
KYC's stock price can go up by 15 percent every year, or down by 10 percent. Both outcomes are equally likely. The risk free rate is 5 percent, and the current stock price of KYC is 100. (a) Price a...
-
The following are comparative financial statements of the Cohen Company for 2006, 2007, and 2008: Additional information: Credit sales were 65% of net sales in 2007 and 60% in 2008. At the beginning...
-
An investor paid $30,000 for 1,000 common shares and later that same year received a 10-percent stock dividend. Compute the gain or loss on sale of 500 common shares for $15,000 before the year end.
-
Payments of $1300 due five months ago and $1800 due three months from now are to be replaced by a single payment at a focal date one month from now. What is the size of the replacement payment that...
-
The following transactions occurred during the month for Mona Wade, CPA, PC: a. Wade opened an accounting firm by investing \($16,500\) cash and office furniture valued at \($5,300\). The business...
-
You are engaged by the owner of a small firm to recommend a one-year compensation contract for the firm's top manager. She is concerned about cash flow and feels that in previous years the manager...
-
1. What are some research questions for an Economics, BA major senior thesis? 2. Give some data based off of those research questions with the links to the websites. 3. What should be included in a...
-
A company that usually sells satellite TV equipment for $50 and two years of satellite TV service for $450 has a special, time-limited offer in which it sells the equipment for $300 and gives the two...
-
A: a = 3i - 2j+5k and b = -2i-j+k Find 2a - 36 and also find its unit vector.
-
Free cash flow valuation Lin is evaluating the potential purchase of a small business with no debt or preferred stock that is currently generating 32,000 of free cash flow 1FCF0 = +32,0002 every...
-
The sales team of a large car dealership in Seattle consists of the following individuals: A customer visiting the dealership randomly chooses one of the salespersons to discuss the purchase of a new...
-
A company manages three different mutual funds. Let \(A_{\mathrm{i}}\) be the event that the ith mutual fund increases in value on a given day. Probabilities of various events relating to the mutual...
-
A large-scale firm specializing in providing temporary secretarial services to corporate clients has completed a study of the main reason why secretaries become dissatisfied with their work...
-
SUPERCOMP, a retail computer store, sells personal computers and printers. The number of computers and printers sold on any given day varies, with the probabilities of the various possible sales...
-
A graph of v(t) is shown for a world-class track sprinter in a 100-m race. (See figure below. For each answer, enter a number.) Velocity (m/s) 14 12 10 0 2 + Runner Velocity vs. Time 4 6 Time (s) 8...
-
Which of the companies has the lowest accounts receivable turnover in the year 20X2? a. Company A. b. Company B. c. Company C. d. CompanyD. 20X1 20X2 Credit Sales Average Receivables Balance $1.0...
-
Recall Figure 12.3, showing the effect of immigrants on the net income of the native-born population, and redraw it with a larger number of immigrants than is already depicted in the figure. Show how...
-
Identify a technological change that has facilitated globalization, aside from those mentioned in the text. Identify a policy change that has contributed to globalization, aside from those mentioned...
-
Suppose that one of the countries discussed in question (1) imposed a tariff, or a tax on imports, which your firm must then add to the cost of exporting to that country. The tariff does not apply;...
-
What is the average rate of return for the values that follow? 0.90, 1.1, 1.2
-
What is the average rate of return for the values that follow? 0.80, 2.0, 5.0
-
State whether the data are symmetrical, skewed to the left, or skewed to the right. 16; 17; 19; 22; 22; 22; 22; 22; 23
Study smarter with the SolutionInn App