A delegation from Transylvania is seeking your advice with regards to if the country should open up and allow international capital flows. Some data about Transylvania: It is currently a closed economy, its national savings rate is 20percent; capitals share of income is 25 percent; and the depreciation rate of the capital stock is5 percent. Its labor force has been growing 1 percent per year over the past 10 years. And bothoutput per worker AND capital per worker have been growing at 6 percent per year over the past10 years. These trends are expected to continue for the indefinite future.

Required:
a. Is Transylvania on a balanced growth path?
b. What is the real rental rate of capital in Transylvania?

Variable rate cd’s = $90 treasury bills = $150 discount loans = $20 treasury notes = $100 fixed rate cds = $160 money market deposit accts. = $140 savings deposits = $90 fed funds borrowing = $40 variable rate mortgage loans $140 demand deposits = $40 primary reserves = $50 fixed rate loans = $210 fed funds lending = $50 equity capital = $120 a. develop a balance sheet from the above data. be sure to divide your balance sheet into rate-sensitive assets and liabilities as we did in class and in the examples. b. perform a standard gap analysis and a duration analysis using the above data if you have a 1.15% decrease in interest rates and an average duration of assets of 5.4 years and an average duration of liabilities of 3.8 years. c. indicate if this bank will remain solvent after the valuation changes. if so, indicate the new level of equity capital after the valuation changes. if not, indicate the amount of the shortage in equity capital.

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Hubert manages a grocery store in a country experiencing a high rate of inflation. to keep up with inflation, he spends a lot of time every day updating the prices, printing new price tags, and sending out newspaper inserts advertising the new prices. his employees regularly deal with customer annoyance over the frequent price changes. this is an example of the of inflation.