Project #72158 - ECON-money and banking

1.  Considering that interest rate targets and aggregate money targets are not compatible:a)  Show graphically, using the asset market how the Fed engages in Money Supply Targets
compared to Interest Rate Targets.b)  Show graphically, using the market for reserves how the Fed engages in Money SupplyTargets compared to Interest Rate Targets.c)  What are the arguments for the Fed to engage in active monetary policy? What are thearguments against the Fed engaging in active monetary policy?
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2.  Using the market for reserves:a) Draw and accurately label the model.b) Show graphically what happens to the quantity of reserves and Fed Funds rate if theeconomy is not doing so well and people are putting less money into their checkable deposit
accounts. Make sure to talk about any “corner” cases in the model.c) Show graphically and explain what happens the quantity of reserves and the Fed FundsRate when the Fed does an Open Market Purchase. Make sure to show and discuss any cornercases in the model.
 
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3. Assume you purchase 200 shares of Apple at $594 per share, but you are worried that it may fall in priceso you wish to hedge part of your position by writing a 100 share option.  The option has a strike price of$240 and a premium of $343.  If at that the time of expiration, the stock is selling at the following prices($200, $500, $750) what will be your overall gain or loss? What if you had done the $300 strike price witha premium of $288?

Subject Business
Due By (Pacific Time) 05/27/2015 11:00 am
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