1. Which of the following is a key determinants of Quantity Demanded of an Asset

Question

1. Which of the following is a key determinants of Quantity Demanded of an Asset?

a. wealth

b. expected return

c. risk, and liquidity

d. all of the above

e. only a. and b.

2. According to the Theory of Asset Demand, holding all other factors constant, the quantity demanded of an asset is:

a) negatively related to wealth

b) positively related to its expected return relative to alternative assets

c) negatively related to the risk of its returns relative to alternative assets

d) all of the above

e) only b. and c.

3. Which of the following is TRUE about the market for bonds?

a) At lower prices (higher interest rates), ceteris paribus, the quantity demanded of bonds is higher

b) At lower prices (higher interest rates), ceteris paribus, the quantity supplied of bonds is higher

c) The market equilibrium occurs when the amount of bonds that people are willing to buy (demand) equals the amount of bonds that people are willing to sell (supply) at a given price.

d) all of the above

e) only a. and c.

4. Which of the following is TRUE about the market for bonds?

a) Bd = Bs defines the equilibrium (or market clearing) price and interest rate.

b) When Bd > Bs , there is excess demand

c) When there is excess demand, the price will fall and the interest rate will increase

d) all of the above

e) only a. and b.

Explanation / Answer

1. The answer is all of the above as weath, expected return, risk and liquidity all are important determinants of the demand of the asset.

Please put other questions separately. Thanks.

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