Question 1

Rank the following assets in terms of liquidity, from the most to the least liquid:

â€¢ $20,000 U.S. Government long-term bonds
â€¢ $5,000 Johns Hopkins Credit Union share draft account
â€¢ $70,000 certificate of deposit
â€¢ $20,000 Honda Accord

Question 2

Go to the St. Louis Federal Reserve FRED database (https://fred.stlouisfed.org), and find data on the M1 money stock (M1NS) and its components. Currently the components of M1 include Currency (CURRSL), Demand Deposits (DEMDEPSL), and Other Liquid Deposits (MDLM). The last component consists of negotiable order of withdrawal and automatic transfer service balances at depository institutions, share draft accounts at credit unions, demand deposits at thrift institutions, and savings deposits, including money market deposit accounts. Calculate the percentage change in the M1 money stock (M1NS) and in each of the three components of M1 from July 2021 to the same time one year prior. Which component has the highest growth rate? Why do you think this component has the highest growth rate?

Question 3

Go to the St. Louis Federal Reserve FRED database (https://fred.stlouisfed.org), and find data on the M2 money stock (M2SL) and its components. Currently the components of M2 include the small-denomination time deposits (STDSL) and balances in retail money market funds (RMFSL). Calculate the percentage change of each of these components of M2 (not included in M1) from July 2021 to the same time one year prior. Which component has the highest growth rate? Determine which grew faster: the non-M1 components of M2, or the M1 money supply. Suggest an explanation for your findings.

Question 4

Suppose you are considering investing $100,000 in one of the following bank certificates of deposit (CDs):

The first CD will pay an interest rate of 4% per year for three years.
The second CD will pay an interest rate of 10% the first year, 1% the second year, and 1% the third year. Which CD should you choose?

Question 5

For each of the following situations, write the equation needed to calculate the yield to maturity (no need to calculate).

a. A simple loan for $250,000 that requires a payment of $375,000 in four years.
b. A car loan of $5,000 that requires payments of $625 for 10 years. The payments start in two years (i.e. the first payment is due at the end of the second year).
c. A discount bond with a price of $830 that has a face value of $1,000 and matures in five years.
d. A coupon bond with a face value of $1,000, a price of $900, a coupon rate of 6% and a maturity of five years.

Question 1 Rank the following assets in terms of liquidity, from...