This question refers to various classes of assets, Briefly respond in 2-3 sentences.
(a) A $1,000 face value bond with a 20% coupon rate is sold for
$500. What is the yield?
(b) Why do long-term bonds typically have higher yields than short-term bonds?
(c) Suppose that you expect cost-push inflation, driven by increases in commodity prices.
What asset is profitable to hold, and why?
(d) Suppose that you expect deflation. What asset is profitable to hold, and why?
(e) You expect demand-pull inflation, driven by loose central bank policy. What asset
is profitable to hold, and why?
(f) Suppose that the Bank of Canada engages in loose monetary policy, buying bonds
and lowering the overnight rate. However, inflation does not rise in the short-term.
Why?
(g) Which type of real estate is uncorrelated to underlying economic conditions? Why?
(h) Satoshi Nakomoto, the founder of Bitcoin (BTC), allegedly owns 1 million BTC.
Suppose that he sells all of his BTC tomorrow. What would this do to the price of BTC,
and why?
