Bond purchases
3 pages
Bonds are a common long-term debt instrument. They are interesting because they are issued with a stated interest rate. Unlike the market interest rates, a bond’s stated interest rate will never change. The stated interest rate is what will be paid to the investor over the bond’s life. This means that the only way to manipulate the total amount earned or paid from bonds is by adjusting the selling price:
- What does it mean when a bond is issued at a premium or a discount?
- How does the issuance cost affect the investor’s earnings from the bond purchases?
- How is the company’s recognized interest expense affected?
Discussion Board; Stabilizing the Economy
As you have learned in Unit 8 (this week), monetary and fiscal policy play important roles in economic stimulation and or stabilization. In this regard:
a. When is it appropriate to use monetary and fiscal policy to stimulate or stabilize the economy?
b. When is it inappropriate to use monetary and fiscal policy to stimulate or stabilize the economy?
c. What specific fiscal policy tools would you use to stimulate aggregate demand and how?
d. What specific monetary policy tools would you use to stimulate aggregate demand and how?
e. What is your conclusion, should policymakers use the monetary and or fiscal policy to stimulate aggregate demand? Explain briefl
Solution:
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