The spread between the interest rates on Baa corporate bonds and U.S. government bonds is very large during the Great Depression years 1930-1933. Explain this difference using the bond supply and demand analysis
What will be an ideal response?
During the Great Depression many businesses failed. The default risk for the corporate bond increased compared to the default-free Treasury bond. The demand for corporate bonds decreased while the demand for Treasury bonds increased resulting in a larger risk premium.
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If the interest rate is 4 percent, how much interest would the retiree earn the first year if she opted for the lump sum payment, and chose to invest the entire payment at this interest rate?
A) $1,400 B) $20,000 C) $55,000 D) $235,000
If the total cost of producing 10 units equals $90, and the average total cost of producing 11 units equals $8.75, then the marginal cost of the eleventh unit produced: a. is definitely greater than the marginal cost of producing the tenth unit. b. is definitely less than the marginal cost of producing the tenth unit. c. is less than the average total cost of producing ten units
d. is greater than the average total cost of producing ten units.