MACRO ECON 6
6th Edition
ISBN: 9780357689820
Author: MCEACHERN
Publisher: CENGAGE L
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Question
Chapter 13, Problem 10P
To determine
Subprime mortgages and their role in financial crisis of 2008.
Concept Introduction:
A subprime mortgage is a type of loan granted to individuals with poor credit scores (640 or less, and often below 600), who, as a result of their deficient credit histories, would not be able to qualify for conventional mortgages. Because subprime borrowers present a higher risk forlenders, subprime mortgages usually charge interest rates above the prime lending rate. The main types of subprime mortgages include fixed-rate mortgage with 40- to 50-year terms, interest only mortgage and adjustable rate mortgages.
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Tasks
Exercise 1
Assess the following functions:
1. f(x)= x2+6x+2
2.f '(x)=10x-2x2+5
a. Find the stationary points. (5 marks)
b. Determine whether the stationary point is a maximum or minimum. (5 marks)
c. Draw the corresponding curves (5 marks)
Problem 2:
The sales data over the last 10 years for the Acme Hardware Store are as follows:
2003
$230,000
2008
$526,000
2004
276,000
2009
605,000
2005
328,000
2010
690,000
2006
388,000
2011
779,000
2007
453,000
2012
873,000
1. Calculate the compound growth rate for the period of 2003 to 2012.
2. Based on your answer to part a, forecast sales for both 2013 and 2014.
3. Now calculate the compound growth rate for the period of 2007 to 2012.
1. Based on your answer to part e, forecast sales for both 2013 and 2014.
5. What is the major reason for the differences in your answers to parts b and d? If you were to
make your own projections, what would you forecast? (Drawing a graph is very helpful.)
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