I want the best possible answer for question 6,7,8,9,10 only.

FIN 4319 Spring 2017 Selected Review Questions--Exam I 1. Provide brief definitions (and examples) for the following: a. surplus-savings unit b. deficit-savings unit; Can a saver be a DSU? Explain. c. financial middleman d. financial intermediary 2. Provide brief answers for the following questions: a. What is indirect lending? b. Explain how secondary markets help facilitate capital formation (investment in real assets). 3. Interest rate calculations: a. Suppose a Treasury bill with 72 days to maturity is quoted at an ask of 4.43% on a bank discount basis. Calculate the price, the bond equivalent yield, and the effective annual yield. b. A 90-day negotiable CD is quoted at 4.75%. Convert the yield to a bond-equivalent basis. c. Verify the reported YTM on the quotes shown below (prices % of par). September 15, 2014 Treasury Quote Maturity Coupon 9/15/2017 1 Bid 99.7969 Ask 99.8359 chg ytm 0.0469 1.056 July 15, 2014 TIPS Quote Maturity 2020 Jul 15 Coupon 1.25 Bid 109.063 Ask 109.163 chg -6 ytm -0.264 Adj Par 1088 4. What are the key services provided by financial intermediaries? What is disintermediation? What is cross-intermediation? Provide specific examples. 6. According to the Fisher model, what are the key determinants of the real rate of interest? Suppose that the average rate of time preference among economic units decreases (i.e. increased preference for future consumption). Use the Fisher model to illustrate how this change would affect the interest rate and the amount of investment in a closed economy. What would happen to current vs. future production (and consumption)? 7 Suppose there are two closed economies: Economy A and Economy B. Economy A has a high average rate of time preference relative to economy B's low average rate of time preference. (1) Describe the differences you would expect to see with respect to interest rates and levels of investment in the two economies. (2) Describe what would occur if these countries were open to international capital flows. 8. How do time preference and the strength of investment opportunities interact to determine whether a particular economic unit will choose to operate as an SSU vs DSU? 9. Suppose that the nominal rate of interest is 5% and the expected rate of inflation is 2%. What is the expected real rate of interest according to Fisher? Calculate the after-tax expected real rate assuming a 30% marginal tax rate. If inflation expectations increase by 2%, what will be the new nominal rate according to Fisher? ...According to Darby/Feldstein? What should happen to bond prices and stock prices if the expected rate of inflation increases? Why? 10. Suppose that there is a decrease in the expected rate of inflation. Using the loanable funds model, illustrate how this would affect the nominal rate of interest