Speculative Demand Assignment Help
Speculative Demand Homework Help for Receiving Online Assistance from Experts
This is something as the name suggest is based on certain speculations. To know about this properly one should first know the definition of it and how it works. It is basically referred to money or money related things. Speculative demand homework help takes a student through this topic is a careful manner so that understanding it becomes easy and not chaotic. Our experts’ main aim when helping is to see the student understands the topic and work without any problem.
Definition of Speculative Demand
It is demand for various financial assets like money, securities, foreign currency, etc. which is generally, not dictated by transactions real in nature like financing or trading. It arises from need of cash for taking advantage of certain investment opportunities which may arise. Speculative demand homework help students to understand all the speculations which are done.
This refers to balances which are held purposely to avoid any capital loss from keeping bonds. The bonds’ net return is sum total of interest payments and capital gains or losses for its variable market value.
Rise in rates of interest can cause aftermarket bond amount to fall which implies capital loss from keeping bonds. So, return on the bonds can become negative and thus one may keep money to avoid loss occurred for bonds.
Relationship between Interest Rate and Speculative Demand
Interest rate is inversely related to speculative demand that is higher the interest rate would be smaller will be the money’s speculative demand. Similarly, if the interest rate is lower, bigger will be the speculative demand. Therefore, speculative demand’s curve for money slopes downward to right.
Speculative Demand has:
- Elastic rate of interest
- Quantity of demanded money is responsive to rates of interest (except when there is a low rate of interest as in this scenario it happens to be perfectly elastic)
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Why high interest rate encourages holding of bonds but not money?
High-interest rates encourage holding of bonds but not money because:
- Opportunity cost of cash holding is high in interest forgone terms
- Negligible risks are attached to loss of capital as the rate of interest is not likely to rise further
- People will be wanting to have speculative balances when speculation arises when bonds are sold and bought. This is because the cost in interest rates forgone is not large, the expectation in the rise of interest rate is general
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