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1. Consider a one-year discount bond that pays $2,000 one year from now. If the rate of discount is 3 percent, calculate the present value of the bond. 2. Consider a one-year discount bond that has a present value of $3,000. If the rate of discount is 5 percent, calculate the future value of the bond (the amount the bond pays in one year). 3. Consider a perpetuity that pays $300 every year. If the rate of discount is 6 percent, calculate the present value of the bond. 4. Consider a fixed-payment security that pays $250 at the end of every year for eight years. If the rate of discount is 3 percent, calculate the present value of the bond. 5. Consider a coupon bond that pays $150 every year and repays its principal amount of $2,000 at the end of six years. If the rate of discount is 7.5 percent, what is the present value of the bond? 6. Consider a coupon bond that pays $350 every year and repays its principal amount of $5,000 at the end of four years. If the rate of discount is 6 percent, what is the present value of the bond? 7. Answer the questions below. Chapter 4: Present Value 55 a. You are negotiating a book deal for your newest novel in which an economist single-handedly saves the world. The publisher offers to pay you an advance of $1 million today plus $500,000 at the end of each of the next three years. What is the present value of these payments, given your rate of discount of 5 percent? Show your work. You may round to the nearest thousand dollars. b. You counter the publisher's offer with a counteroffer that will pay you $1.5 million today plus $5 per book sold in each of the next three years. You think you will sell 80,000 books each year in that period, but the publisher thinks you will only sell 40,000 books each year. Explain why both you and the publisher like this counteroffer better than the deal in part a. Show your work. 8. You borrow $30,000 for 10 years to pay tuition and fees. The annual interest rate is 12 percent. What monthly payment would be required to pay off the loan
Question: Explain why the free rider problem makes it difficult for perfectly competitive markets to provide the Pareto efficient level of a public good.
Some commentators have argued that the failure of the “Super committee” is good thing for the economy? Do you agree?
Case study analysis about optimum resource allocation: - Why might you suspect (even without evidence) that the economy might not be able to produce all the schools and clinics the Ministers want? What constraints are there on an economy's productio..
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Article Review Question: Read the following excerpts from the article "Fruit, veg costs surge' by Todd, Dagwell, published in the Herald on January 25th 2011 and answer questions below:
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"Does the economic bailout of Spain and Greece spell the beginning of the end for the European Monetary Union (EMU)?"
Read the rules of the game, the overview and the almanac for the Development Game "Settlers of Catan"
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