The following table shows Uma's estimated annual benefits of holding different amounts of money: Total benefit Extra benefit Average money holdings (5) ($) ($) 135 147 500 600 700 800 900 1,000 1,100 1,200 157 165 171 175 177 177 12 10 8 C 4 2 0 Find the extra benefit of each additional $100 in money holdings and complete the table above. Comparing the benefit with the opportunity cost, in terms of forgone interest, how much money will Uma hold on average if the nominal interest rate is 10 percent? 6 percent? 4 percent? Instructions: Assume that Uma wants her money holding to be in a multiple of $100. Uma's average money holdings at: 10 percent: $1 6 percent: $ 4 percent: $

The following table shows Uma's estimated annual benefits of holding different amounts of money: Total benefit Extra benefit Average money holdings (5) ($) ($) 135 147 500 600 700 800 900 1,000 1,100 1,200 157 165 171 175 177 177 12 10 8 C 4 2 0 Find the extra benefit of each additional $100 in money holdings and complete the table above. Comparing the benefit with the opportunity cost, in terms of forgone interest, how much money will Uma hold on average if the nominal interest rate is 10 percent? 6 percent? 4 percent? Instructions: Assume that Uma wants her money holding to be in a multiple of $100. Uma's average money holdings at: 10 percent: $1 6 percent: $ 4 percent: $

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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see attached. Whats the maximum whole dolla amount this individual would spend to insure against the loss of money?
Suppose a group of cattle ranchers each have $100 to spend. The farmers can either purchase a steer for $100, and let it graze in a common grazing area, or they can buy a bond with the $100 which receives an interest rate of 9%. The table below gives the value of each steer after it has been grazing for one year. # of steers Price per steer 1 $160 2 $150 3 $140 4 $130 $120 6 $110 7 $100 If the ranchers put their steers in the grazing area one at a time and act alone (only in their self interest), there will be [ Select ] v steers on the grazing area. However, if the ranchers work together to maximize their total income, there will be [Select ] steers on the grazing area.
Suppose you wish to borrow $800 for four weeks and the amount of interest you must pay is $20 per $100 borrowed. What is the arp at which you are borrowing money
6. You may borrow or lend at a 5% interest rate, which you expect to remain stable forever. Make a choice and explain your answer in each scenario below. a. You may receive a gift of $500 today or a gift of $540 next year. b. You may receive gift of $100 today or a four-year loan of $500 without interest. c. You may receive a $350 rebate on an $8000 car or one year of no-interest financing on the full price of the car. d. You have just won $1 million in the lottery. You may receive $500,000 now or the full million, paid out in 20 annual payments of $50,000. e. Alternatively, you may take $500,000 now or receive $25,000 per year for eternity (a contract that your heirs will inherit).
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35. Which of the following is the correct way to compute the future value of $100 put into an account that earns 4 percent interest for 10 years? a. $100(1 + .0410) b. $100(1 + .04 × 10) c. $100 × 10 × (1 + .04) d. $100(1 + .04)10 Group of answer choices c b d a
3. Consider a society of identical individuals who live for two periods. They have the following utility: In co + 3 5 In ci Each individual earns $600 when young, in period 0, and no income in period 1, when old. They can borrow and lend at interest rate r, and the price of consumption is 1. (a) Write down this individual's lifetime budget constraint (b) Solve for this individual's consumption in period, and savings, as a function of r. (c) Suppose now that there is a Social Security program. The gov- ernment collects $ 60 from this individual in period 0, and gives it back with interest r in period 1. i. What kind of social security system is this? ii. What is the new amount of savings? iii. What is the impact of this program on the individual's wel- fare? (d) Suppose some individuals have utility 1 In co +In c₁ 9 The social security system still forces them to save $60. i. If they are still free to borrow and lend at r, what will their optimal choice of consumption and savings be,…
10. What is the present value of a perpetuity of $100 if the appropriate discount rate is 7%? If interest rates in general were to double and the appropriate discount rate rose to 14%, what would happen to the present value of the perpetuity?
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Angela puts $1,000 in a savings account that pays 3 percent per year. What is the future value of her money one year from now? a. $970. b. $1,000. c. $1,003. d. $1,030.
Why is it helpful to track your spending for 2 months?a. You can receive higher interest rates for your savings account when you canshow how you spend your money.b. You can receive special discounts at certain stores when you can show howyou spend your money.c. To identify your spending patterns and then prioritize your needs, wants, andsavings goals.d. To eliminate all spending on your want
affect the interest rate charged on loans. a. Differences in the present value of loans b. Differences in the expected rate of return on capital c. Differences in the present value of annuities d. Differences in the tax treatment of loans e. Differences in the rate of time preference