Answer the following questions. (5)

(a) What is the implication of a correlation matric not being positive-semidefinite?

(b) Why are the diagonal elements of a correlation matrix always 1?

(c) Making small changes to a positive-semidefinite matrix with 100 variables will have no effect on the matrix. Explain this statement?

1. Explain how the intertemporal budget constraint and indifference curves are used to derive a consumer’s optimal choice of current and future consumption.

2. Explain how the desired levels of capital and investment are affected by changes in the expected marginal product of capital, the user cost of capital, and taxes.

Which statement below is most precise?

a. Deceleration means that the acceleration is negative

b. Acceleration tells us how quickly the speed changes

c. When the acceleration and the velocity have the same sign the object's speed Increases

d. A positive acceleration always points to the right

The determinants of asset demand apply to gold as well: wealth, expected return on gold relative to alternative assets, riskiness of gold relative to alternative assets, and liquidity of gold relative to alternative assets. Show graphically and explain how changes in each factor shifts the demand for gold.

Over the last 20-30 years, Treasury Departments have reduced significantly the number of full time employees working solely on Treasury issues. What changes has allowed Treasury to process more data, provide more and better analysis and improve the Treasury process?

a) Define and explain the following terms:

Secured versus unsecured debt

Senior versus subordinated debt

b)  Compare 30-year bond to a 5-year bond all else equal. Which one is more sensitive to interest rate changes. Why? Please explain.

NO COPY AND PASTE. Write your own opinion.

Pepsi enters India.

1. How did the company react to the changes in the business environment after the liberalization of the Indian economy in the earl 1990s? Critically comment on the allegations that Pepsi deliberately did not adhere to most of its commitments.

Given the information in the table, what is the reinvestment effect in year 4
if the interest rate changes from 4.00% to 6.00% ?