·Du, Today at 1159 PMEST Back to Assignment Keep the Highest:12 1. The opportunl
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·Du, Today at 1159 PMEST Back to Assignment Keep the Highest:12 1. The opportunlity cost of holding money Suppose you've just Inherited $10,000 from a relative. You're trying to decide whether to put the $10,000 in a non-interest-bearing account so that you can use it whenever you want (that is, hold it as money) or to use iR to buy a U.S. Treasury bond The opportunity cost of holaing the inheritance as money depends on the interest rate on the bond. For each of the interest rates in the following table, compute the opportunity cost of holding the $10,000 as money Oppertunity Cost (Dellars per year) Interest Rate on Government Bond What does the previous analysis sugapest about the market for money O The supoly of money is independent of the interest rae The quantity of money demanded decreases as the interest rate rises. The quarter or morey an increanen as the interest rate run 2 3 4 caps lock N NMExplanation / Answer
The opportunity cost of holding money at an interest rate of 8% is "$800", and at a rate of 10% is "$1000".
What does this suggest about the market ??
"The quantity of money demanded decreases as the interest rates rise" as the interest rate rises people will hold less money in hand and invest more.
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