Reference no: EM13239731
Three students have each saved $1000. Each has an investment opportunity in which he or she can invest up to $2000. The rates of return on the students' investment projects are:
Harry: 5%
Ron: 8%
Hermione: 20%.
a) If borrowing and lending is prohibited, so each student uses only his or her own saving to finance his or her own project, how much will each student have a year later when the projects pay their returns?
b) Now suppose their school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r. What would determine whether a student would choose to be a lender or a borrower in this market?
c) Among those three students, what would be the quantity of loanable funds supplied and quantity demanded at an interest rate of 7%? At 10%?
d) At what interest rate would the loanable funds market among the three students be in equilibrium? At this interest rate, which students would borrow and which would lend?
e) At the equilibrium interest rate, how much does each student have a year later after the loans have been repaid and the projects pay their returns? Compare your answers to part a). Who benefits from the market? Is anyone worse off?
|
How much cloth and food will the economy produce
: Write down the unit cost of producing one yard of cloth and one calorie of food as a function of the price of one machine-hour, r, and one work-hour, w. In a compet- itive market, those costs will be equal to the prices of cloth and food.
|
|
Determine the total outward force on the window
: A viewing window on the side of a large tank at a public aquarium measures 32 in. by 37 in. The average gauge pressure from the water is 6 psi
|
|
Explain the oxidation of nitrogen monoxide from car exhaust
: In the lower troposphere, ozone is one of the components of photochemical smog. It is generated in air when nitrogen dioxide, formed by the oxidation of nitrogen monoxide from car exhaust, reacts by the following mechanism.
|
|
What is the value of gnp using the value-added approach
: Assume the economic activity of the economy in a given year consists of the following: Steel producers fabricate Php. 4 billion of farm machinery, which is sold to farmers; Farmers produce 40 million sacks of rice, which is sold for Php. 25 billion ..
|
|
What would be the quantity of loanable funds supplied
: Three students have each saved $1000. Each has an investment opportunity in which he or she can invest up to $2000. The rates of return on the students' investment projects are: Harry: 5% Ron: 8% Hermione: 20%.
|
|
Describe the initial concentration of iron chloride solution
: What is the initial concentration (in M) when 17.8 mL of a iron(lll) chloride solution was diluted with 15.3 mL of solvent to a final concentration of 0.725 M? Assume the volumes are additive.
|
|
How many neutrons are in the left half of the box
: At t = 0 it is known that of 1000 neutrons in a one-dimensional box of width 10-5 cm, 100 have energy 4E1, How many neutrons are in the left half of the box
|
|
Calculate the value added of each of the three producers
: A farmer grows wheat, which he sells to a miller for $100. The miller turns the wheat into flour, which he sells to a baker for $150. The baker turns the wheat into bread, which he sells to consumers for $180. Consumers eat the bread.
|
|
Find the distance between speaker b and the observer
: Suppose that the separation between two speakers A and B is 4.40 m and the speakers are vibrating in-phase, What is the largest possible distance between speaker B and the observer,
|