MGT 411 Money & Banking - 1

Explanation
The lender should be willing to accept $92.59 today because of the concept of the time value of money. The lender's opportunity cost of money is 8%, meaning that if they were to invest the $92.59 today, they would expect to have $100 one year from now. This takes into account the interest that could be earned on the investment, and therefore the lender should be willing to accept this amount today in order to achieve the promised $100 payment in the future.

Explanation
The present value is the current value of a future payment, and it is inversely related to the future value. This means that as the future value increases, the present value decreases. Therefore, the higher the future value of the payment, the higher will be the present value.

Explanation
The procedure of finding out the Present Value (PV) is known as discounting. Discounting is a financial concept that involves calculating the current value of future cash flows by applying a discount rate. It takes into account the time value of money, which means that a dollar received in the future is worth less than a dollar received today. By discounting future cash flows, we can determine their present value, which is useful for making investment decisions or valuing financial instruments.

Explanation
Money appears to have a major influence on inflation, interest rates, and the business cycle. This is because the amount of money in circulation affects the overall level of prices in the economy, which is reflected in inflation. Additionally, the central bank uses interest rates as a tool to control inflation and stimulate or slow down economic growth, thus influencing the business cycle. Therefore, money plays a significant role in all three factors mentioned above.

Explanation
Budget deficits may influence the conduct of monetary policy. This is because when a government runs a budget deficit, it needs to borrow money to cover the shortfall. This increased borrowing can lead to higher interest rates, which in turn can affect the overall economy and monetary policy. Additionally, budget deficits can also impact inflation rates and the value of the currency, both of which are important considerations for monetary policy decisions. Therefore, studying budget deficits in a money and banking class is important to understand their potential impact on monetary policy.