ECON 203 Lecture Notes - Lecture 8: Demand For Money, Interest Rate
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Market shares of chocolate makers are in the table.
| Market share |
Mayfair, Inc | 15 |
Bond, Inc | 10 |
Magic, Inc | 25 |
All Natural, Inc | 10 |
Truffles, Inc | 25 |
Gold, Inc | 15 |
a. Calculate the four firm concentration ratio.
b. Calculate the Herfindahl-Hirschman Index.
5. If the interest rate is 6 percent, what is the present value of a bond that matures in two years, pays $85 one year from now and $1,085 two years from now?
6. Suppose that eLake, an online auction site, is paying a dividend of $2 per share. You expect this dividend to grow 4 percent per year, and the interest rate is 10 percent.
a) What is the most you would be willing to pay for a share of stock in eLake?
b) If the interest rate is 6 percent, what is the most you would be willing to pay?
c) Comparing your answers to a and b, when interest rates decline, would you expect stock prices in general to rise or fall?