The nominal T-bill interest rate is 7.0% in Round 2. The inflation rate over the course of Round...

Question:

Borrower Nominal Rate of Return on the Project (Percentage)
Ayon 13.8
Barb 13.0
Carios 12.2
Darius 11.4
Ellen 10.6
Fay 9.8
Grace 9.0
Habeeb 8.2
Ida 7.4
Jack 6.6

The nominal T-bill interest rate is 7.0% in Round 2. The inflation rate over the course of Round 2 is 6.0%.

Which of the following results would supply and demand analysis predict for Round 2?

A) Borrowers and lenders will arrange 8 loans, at nominal interest rates of 6.6% or slightly higher.

B) Borrowers and lenders will arrange 9 loans, at nominal interest rates of 1.0% or slightly higher.

C) Borrowers and lenders will arrange 9 loans, at nominal interest rates of 6.0% or slightly lower.

D) Borrowers and lenders will arrange 9 loans, at nominal interest rates of 6.6% or slightly lower.

E) Borrowers and lenders will arrange 9 loans, at nominal interest rates of 7.0% or slightly higher.

Treasury Bills:

Treasury bills are short term government obligations that usually have a maturity period of less than one year. T-bills, which are backed by the government's treasury, are primarily issued to fund the government's spending.

Answer and Explanation:

From the data in the question, the nominal rate of return for nine projects is greater than 7.4 percent. Additionally, the Treasury bill awards an...

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Government Securities: Definition, Types & Examples

from Introduction to Business: Homework Help Resource

Chapter 24 / Lesson 12
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