Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Unit Activity: Mathematical Models and Investments
Part D
Jacob lost his job and now has to buy health insurance on his own. Why are his premiums likely to increase?
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Part E
Describe a person who would not need life insurance.
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Unit Activity: Mathematical Models and Investments
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Part C
Suppose the government eliminated all capital gains taxes on bonds but not on stocks. What would this change do to the price
of stocks and why? What might companies do in response to this change?
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Part D
John is considering taking out a loan to purchase stocks, using his house as collateral on the loan. He believes his stock returns
will be greater than the interest payments on his loan. Evaluate the risks and rewards of his plan.
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