The Behavior of Interest Rates Discussion

The Behavior of Interest Rates Discussion
1. Explain why you would be more or less willing to buy
a share of Microsoft stock in the following situations:
a. Your wealth falls.
b. You expect the stock to appreciate in value.
c. The bond market becomes more liquid.
d. You expect gold to appreciate in value.
e. Prices in the bond market become more volatile.
*2. Explain why you would be more or less willing to buy
a house under the following circumstances:
a. You just inherited $100,000.
b. Real estate commissions fall from 6% of the sales
price to 5% of the sales price.
c. You expect Microsoft stock to double in value next
year.
d. Prices in the stock market become more volatile.
e. You expect housing prices to fall.
3. Explain why you would be more or less willing to buy
gold under the following circumstances:
a. Gold again becomes acceptable as a medium of
exchange.
b. Prices in the gold market become more volatile.
c. You expect inflation to rise, and gold prices tend to
move with the aggregate price level.
d. You expect interest rates to rise.
*4. Explain why you would be more or less willing to buy
long-term AT