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Suppose that you re considering the purchase of a security that has the following timeline of payments:
Year Interest face value
1 600
2 600
3 600
4 600; 1000
a) How much would you be willing to pay for this security if he market interest rate is 6%?
b) Suppose that you have just purchased the security, and suddenly the market interest rate falls to 5%. What is the security worth?
c) Suppose that one year has elapsed, you have received the first payment of 600$, and the market interest rate is still 5%. How much would another investor be willing to pay for your security?
d) Suppose that the two years have elapsed since you purchased the security, and you have received the first two payments of $600 each. Now suppose the market interest rate suddenly jumps to 10%. How much would another investor be willing to pay for your security?
Stan Money maker needs 15 gallons of gasoline to top off his automobiles’ gas tank. If he drives an extra eight miles (round trip) to a gas station on the outskirts of town, Stan can save $0.10 per gallon on the price of gasoline.
A monopolist faces the demand curve Q = 60-P/2. The cost function is C=Q2. Find the output that maximises this monopolist’s profits. What are the prices at profits and that output? Find the elasticity of demand at the profit maximising output.
If the economy currently has a frictional unemployment rate of 2 percent, structural unemployment of 2 percent, seasonal unemployment of 0.5 percent, and cyclical unemployment of 2 percent, what is the natural rate of unemployment? Where is the ec..
How does lobbying work in government?
Calculate the magnitude of the consumer surplus and producer surplus in the pre-tax equilibrium and calculate the tax revenue in the post-tax equilibrium
Suppose the price of widgets falls from $7 to $5 and consumption of widgets rises from 15 widgets a month to 25 widgets. Calculate your price elasticity of demand of widgets. What can you say about your price elasticity of demand of widgets? Is it..
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the toilet manufacturer has proposed a quantity discount schedule for toilets as reflected in the following table for
What uniform series of cash flows is equivalent to a $100,000 cash flow, fifteen years from now, if the uniform cash flows occur at the end of the year for the next fifteen years and the periodic interest rate is 8.5 percent compounded yearly?
Suppose that the government thinks that gasoline consumption is too high. Suppose the government wishes to decrease gasoline consumption by 20,000 gallons per day. How big an excise tax would need to be imposed in this market in order for the governm..
Suppose the federal government needs to balance the budget, which means that when the government spending increases, taxes must increase equally. In this case, government spending multiplier is called the balanced-budget multiplier, defined as the..
deliverable length 1-2 pages details the world bank is currently advising newly industrialized countries on how to
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