Substation effect of real interest rate on savings is zero

Assignment Help Financial Management
Reference no: EM131605850

Lisa has no outstanding debt and she currently works 1, 500 hours a year at $20 per hour. The current real rate of interest is 2% and she consumes 95% of her income and saves the remainder. If Lisa's substation effect of the real interest rate on savings is zero, an increase in the real interest rate from 2% to 5% will lead to an increase in consumption today of $42.86.

Reference no: EM131605850

Questions Cloud

Calculate the future value of series of cash flows : Describe how to calculate the future value of a series of cash flows. Describe the five inputs to a time value of money problem?
According to the constant dividend growth model : According to the constant dividend growth model, if the required return is 15 percent, what should the value of the stock be two years from now?
What is the after-tax cost of capital for debt financing : What is the after-tax cost of capital for this debt financing?
Time value of money problems : How long will it take for a $2,000 investment to double in value? What will be the value of 20 years of $500 invested at the end of each year for next 20 years.
Substation effect of real interest rate on savings is zero : If Lisa's substation effect of real interest rate on savings is zero,
What is name of strategy-what is maximum profit of trader : What is the maximum profit of a trader? What is the name of this strategy? What is a trader betting on when he/she is employing such a strategy?
Internal common equity and external common equity : Calculate the cost of (a) internal common equity and (b) external common equity.
Brand defined benefit pension plan : Sachs Brands' defined benefit pension plan specifies annual retirement benefits equal to: 1.4% × service years × final year's salary, payable at end of each yea
What is a swap and why is it off-balance-sheet : What is a swap? Why is it off-balance-sheet?

Reviews

Write a Review

Financial Management Questions & Answers

  What is a joint production process

What is a joint production process? Describe a special decision that commonly arises in the context of a joint production process. Briefly describe the proper approach for making this type of decision.

  What is the average tax rate and marginal tax rate

What is the average tax rate? What is the marginal tax rate?

  Prepare journal entries to record redemption of old issue

On June 30, 2006, County Company issued 12% bonds with a par value of $826,900 due in 20 years. They were issued at 99 and were callable at 105 at any date after June 30, 2014. Prepare journal entries to record (1) the redemption of the old issue and..

  What is the current bond price

Ninja Co. issued 12-year bonds a year ago at a coupon rate of 8.4 percent. The bonds make semiannual payments. If the YTM on these bonds is 6.7 percent, what is the current bond price?

  What will your cumulative mark to market be if gold prices

What will your cumulative mark to market be if gold prices are $1,291.85 per ounce at expiration?

  Expect to sell the share immediately after it pays dividend

If you want to earn a 9.3% return on your investment what price do you need if you expect to sell the share immediately after it pays the dividend?

  Opportunity to purchase land currently zoned residential

A real estate investor has the opportunity to purchase land currently zoned residential. If the county board approves a request to rezone the property as commercial within the next year, the investor will be able to lease the land to a large discount..

  Sometimes called the benefit ratio is calculated

The profitability index, sometimes called the benefit ratio is calculated by;

  Projected net cash

hat should EBIT be? Projected Net Cash

  Rom a position of potential gdp and zero inflation

Describe the behaviour of prices, output, interest rates, consumption, investment, and net exports.

  Draw the time line showing the dividends per share of stock

The Amazing Video Co. has just paid an annual dividend of 40 cents. You forecast that for the next five years dividends will grow at the rate of 25% a year over the period. From year five on, you expect the growth rate to fall to the industry average..

  FITCO is considering the purchase of new equipment

FITCO is considering the purchase of new equipment. The equipment costs $350,000, and an additional $110,000 is needed to install it.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd