1. Suppose, a countrys M-1 was Tk.

540 Crore and gross national product (GNP) was

Tk.9461 Crore during 2011. What is the velocity of money?

Given that,
Gross National Product/Income, Y = 94610000000
Nominal Money, M = 5400000000
Velocity, V =?

We know that,
V=

Y
M

94610000000
5400000000

17.5203703

So, the required velocity of money is 17.5203703

Page 1 of 7

2. Find the Average Stock Yield from the following information:

Year

Price

Dividend

214

15

220

13.5

200

12

210

11.5

230

10

235

14

For year 0 ,

Expected Gain, SP=0

Dividend , D=15
Stock Price , SP=44

SY 0=

D+ SP
SP

Page 2 of 7

15+ 0
214

0.07

For year 1,

Expected Gain , SP=220214=6

Dividend , D=13.5
Stock Price , SP=220

SY 1=

D+ SP
SP

13.5+6
220
0.08

For year 2,

Expected Gain , SP=210220=20

Page 3 of 7

Dividend , D=12
Stock Price , SP=200

SY 2=

D+ SP
SP

1220
200

.04

For year 3,

Expected Gain , SP=210200=10

Dividend , D=11.5
Stock Price , SP=210

SY 3=

D+ SP
SP

11.5 +10
210

0.1023

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For year 4,

Expected Gain , SP=230210=20

Dividend , D=10
Stock Price , SP=230

SY 4 =

D+ SP
SP

10+20
230

0.1304

For year 5,

Expected Gain , SP=235230=5

Dividend , D=14
Stock Price , SP=235

SY 4 =

D+ SP
SP

14 +5
235

0.081

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The Average stock yield ,

SY 0 +SY 1+SY 2 +SY 3+SY 4 +SY 5

6

.07+ .08.04+ .1023+.1304+.081

6

0.42355
6

0.07059

3. Suppose, bonds which no default risk have the following spot Yields: a Three-year
bond yields 7% and Four-Year bond Yields 9%. What is the implied forward rate
during the fourth year?

Given that,

Three year bond Yield, S 3 =7% or .07

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Four year bond Yield, S 4

= 9% or .09

Number of year, N =4
Implied forward rate, r =?

We know that
N

( 1+S N )
r=
1
N1
( 1+ S N1 )
4

( 1+S 4 )
r=
1
41
( 1+ S4 1)

Or,
4

( 1+S 4 )
, r=
1
3
( 1+ S3 )
, r=

( 1+ .07 )4
1
( 1+.09 )3

( 1.07 )4
, r=
1
( 1.09 )3
, r=

1.31079601
1
1.295029

, r=1.0121751
, r=0.0121751.2175

Page 7 of 7