Microeconomic Theory
12th Edition
ISBN: 9781337517942
Author: NICHOLSON
Publisher: Cengage
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Question
Chapter 17, Problem 17.3P
To determine
To find:Time duration after which a person sell scotch to maximize PDV.
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Suppose that $500 is invested at the end of every year for 5 years. The polynomial
function that models the value of the investment is
P(x) = 500x5 + 500x4 + 500x³ + 500x² + 500x, where x
represents the effective interest rate plus 100%. One year after the last payment, the
investment is worth $3200. Find the effective interest rate one year after the last
payment, to the nearest tenth. (Note: You will need to subtract 1 from the value of x
to find the effective interest rate.)
You can invest in an account that pays simple interest or an account that pays compound
interest. In either case, you plan to invest $2,900 today and both accounts have an annual
interest rate of 8 percent. How much more interest will you receive in the 11th year in the
account that pays compound interest?
Suppose Neha is a sports fan and buys only baseball caps. Neha deposits $3,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a baseball cap is priced at $10.00.
Fill in the chart: 0% 5% 8%
Number of Caps Neha Can Purchase after One Year
Choices: 291, 305, 315, 582
Choices: 291, 300, 305, 582
Choices: 291, 305, 315, 582
Real Interest Rate
When the rate of inflation is less than the interest rate on Neha's deposit, the purchasing power of her deposit __________ (options: falls, rises, remains the same) over the course of the year.
Chapter 17 Solutions
Microeconomic Theory
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