Demand for Bonds Essay Example | Topics and Well Written Essays - 1000 words

Demand for Bonds - Essay Example Thus there will be a windfall loss if bonds are purchased. Thus, bond demand will be low. This also implies that if expected future bond prices are high, then the demand for bonds will rise and vice-versa. iv) Expected inflation: Expected inflation has an adverse impact on bond demand. If there is an increase in expected inflation, bond demand will fall and vice versa. v) Relative risk: If the risk associated with a bond increases relative to other assets the demand for that bond will fall. Analogously if there is a decline in the relative riskiness of a bond, its demand will increase. vi) Relative liquidity: If there is an increase in the relative liquidity of a bond, i.e., if converting the bond into cash becomes relatively easier, the demand for it shall rise if other things remain the same and vice versa. vi) Business-cycle movements: If the economy is undergoing a boom, there will be an increase in the demand for bonds. Similarly, the demand for bonds will fall if the economy is suffering a recessionary period. b) Analyse the following statement:   â€Å"This week, the yield on the US Treasury note closed below 3%, a level not seen in 50 years. In the UK, the 10-year Gilt yield sits below 4% for the first time since 1961, according to UBS. Germany’s Bund yield is closing in on 3%. ... This time, the threat of delfation is being taken more seriously. Should policymakers again avert that fate, bond yiels may be primed for an explosive rise as fiscal spending plans and the expansion in money supply suggest inflation is the likely outcome†. [Source: Financial times 28-Nov-2008] Before commenting on the report it will be useful to note that as mentioned above bond demands (and thus investment) are induced by business cycle booms and dissuaded during recessions. However, during booms since the threat of inflation looms large, it is a natural counteracting force to the possibility of overinvestment. Similarly, during recessions, the adverse effect on the demand for bonds can be countered by the threat of deflation. Now, let's turn to the report. The first and foremost point to note in this context is the date of the report. It is dated November, 2008. Thus the US, UK and the German economies were in recession, arguably the worst one since the great depression (This was during the heart of the global financial crisis). Thus, one should expect expansionary monetary policies during this time. Lower interest rates ideally stimulated investment demand and thus increase the effective demand which leads to an expansion in real aggregate output with a multiplier effect and thus employment as well. What is reported seems to be along the same lines of intention. The current yields on US Treasury note fell to a level that was a precedent in 50 years. Similarly there was a decline in long term yields in the UK economy (gilt) and Germany (bund yields). However, in order for this policy to work, the falling bond yields

The math behind the Pendulum Research Paper Example | Topics and Well Written Essays - 2250 words

The math behind the Pendulum - Research Paper Example As the period of a pendulum is constant, pendulums were used to regulate the movement of clocks. Until the 1930’s pendulums were the most accurate time keeping devices of the world. In 1583, the Italian scientist Galileo first noted the constancy of a pendulum’s period by comparing the movement of a swinging chandelier in a Pisa cathedral with his pulse rate. He found that the time was not a function of how wide the chandelier swung. As the wind was blowing the chandelier, it was swinging different distances side to side or amplitudes. Galileo found that the pendulum swung more slowly. Over a shorter swing, the chandelier took just as many of his heartbeats to complete a swing with greater amplitude. Galileo made an error in the calculation of the angle of the chandelier. In 1656, the Dutch mathematician and scientist Christian Huygens invented a clock controlled by the motion of a pendulum (Huygens and the Pendulum, Princeton). The accuracy of mechanical clocks improve d in the span of a couple of decades in the early 17th century from plus or minus half an hour per day to one second per day. This quantum increase in accuracy of timing enabled previously unimagined degrees of precision measurement in mechanics, astronomy and other fields of study. Time then for the first time was expressed as an independent variable in the investigation of nature. For example, each of the following could be reliably investigated for the first time: The effect of force on objects over time The distance of fall over time The change of speed over time The radial movements of planets over time The progress of chemical reactions over time All these investigations required that the time could be accurately and reliably measured. Thus the pendulum held a very important place as a time keeping device. Competent time measurement was a requirement for modern science and the pendulum enabled this to happen (Story behind the science, Web). The pendulum played more than a scie ntific and technical role in the formation of the modern world. It also indirectly changed cultures and societies through its impact on navigation. Position on the Earth’s surface is given by latitude and longitude. A traveler sailing across the sea must know the coordinates of his present position as well the coordinates of his destination. Hence the knowledge of position was essential for reliable traveling and trading. Accurate time measurement was long seen as the solution to the problem of longitude determination which had vexed European maritime nations in their efforts to sail beyond Europe’s shores. Treasure fleets from Latin America, trading ships from the Far East were all getting lost and running out of food and water. The pendulum thus played a pivotal role in resolving the longitude problem and thus holds an important place in Physics as well as History. This thesis will focus on the interesting aspects about the period of a pendulum and its mathematical d erivation. According to Hooke’s law, the restoring force of a spring is directly proportional to its displacement. Fig 1: Physical representation of Hooke’s law The above figure shows a spring elongated through a length x. F is the force that wants to drive the spring back to equilibrium. By Hooke’s law, |F| ? |x| F = -kx where k is the spring constant measured in Newton/metre (N/m) Here, the negative sign represents that the direction of F is opposite to that of x. Moving further on, consider the case