ECO 316 ECO316 WEEK 1 ASSIGNMENT DETERMINATION OF INTEREST RATES - ASHFORD
Ashford ECO 316 Week 1 Assignment Determination of Interest Rates [WLOs: 3, 4] [CLOs: 1, 3]
Determination of Interest Rates [WLOs: 3, 4] [CLOs: 1, 3]. Due by Day 7. Prior to beginning work on this assignment, read Hubbard and O’Brien’s Chapters 3 and 4. Choice Financial is a financial services firm based in San Diego, California. In early 2018, Tom Jones, a financial analyst for the firm, predicted that the inflation rate would go up from 1.5% in 2018 to 6% in 2020. He advised investors not to buy bonds because their prices would fall as inflation increased.
• · Explain why bond prices fall when inflation increases.
• · Analyze the relationship between the price of bonds and interest rates.
• · Appraise how interest rates are determined using the following models, explaining whether the different
models produce different results in determination of interest rates.
o Demand and Supply o Bond Market
o MoneyMarket
o MoneyMarket
· Evaluate how each of the following affects interest rates and the price of bonds: o YieldtoMaturity
o Bond Yields o Risk
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