Contabilidad

Chapter 6

Interest Rates and Bond Valuation

„ Solutions to Problems

P6-1. LG 1: Interest Rate Fundamentals: The Real Rate of Return

Basic

Real rate of return = 5.5% – 2.0% = 3.5%

P6-2. LG 1: Real Rate of Interest

Intermediate

(a)

Supply and Demand Curve

0

1

2

3

4

5

6

7

8

9

1 5 10 20 50 100

Current

Suppliers

Interest Rate

Required

Demanders/

Supplier (%)

Demanders

after new

Current

demanders

Amount of Funds

Supplied/Demanded ($) billion

(b) The real rate of interest creates an equilibrium between the supply of savings and the demand

for funds, which is shown on the graph as the intersection of lines for current suppliers and

current demanders. K0 = 4%

(c) See graph.

(d) A change in the tax law causes an upward shift in the demand curve, causing the equilibrium

point between the supply curve and the demand curve (the real rate of interest) to rise from

ko = 4% to k0 = 6% (intersection of lines for current suppliers and demanders after new law). Chapter 6 Interest Rates and Bond Valuation 145

P6-3. LG 1: Real and Nominal Rates of Interest

Intermediate

(a) 4 shirts

(b) $100 + ($100 × 0.09) = $109

(c) $25 + ($25 × 0.05) = $26.25

(d) The number of polo shirts in one year = $109 ÷ $26.25 = 4.1524. He can buy 3.8%

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