EBK PRINCIPLES OF ECONOMICS
7th Edition
ISBN: 8220102958395
Author: Mankiw
Publisher: CENGAGE L
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Question
Chapter 26, Problem 1QCMC
To determine
The difference between the Stock and the Bond.
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"Knowing how to secure your financial well-being is one of the most important things
you'll ever need in life. You don't have to be a genius to do it. You just need to know
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Use the excerpt from the SEC's Guide to Saving and Investing to answer the
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Describe the importance of government agencies, like the SEC, in protecting your
investments.
Solve it clearly
Please do your own work, don't copy from the internet
Q2)
2, You invest $3,000 for three years at 12 percent.
a. What is the value of your investment after one year? Multiply $3,000 × 1.12.
b. What is the value of your investment after two years? Multiply your answer to part a by 1.12.
c. What is the value of your investment after three years? Multiply your answer to part b by 1.12. This gives your final answer.
Combine these three steps by using the formula to find the future value of $3,000 in 3 years at 12 percent interest.
Chapter 26 Solutions
EBK PRINCIPLES OF ECONOMICS
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Similar questions
- Consider that you were given a US savings bond that will pay $100 when it matures in ten years. What happens if the interest rate rises to the present value of this bond payment?Why happens if the interest rate rises to the present value of this bond payment? A. Increases in present value B. The current value is unaffected. C. A decrease in present valuearrow_forwardArjay plans to sell a bond that matures in one year and has a principal value of $1,000. Can he expect to receive $1,000 in the bond market for the bond? Explain.arrow_forwardmany people think that the interest rate on a bond tells them all they need to know about how well off they are as a result of owning it. Explain the statement.arrow_forward
- I get a stock tip that Canada Goose is about to diversify their products by releasing a line of summer swimwear. I have $3,000 of my own money that I invest in Canada Goose stock. Suppose that their swimwear does very well and the value of their stock rises by 50%. How much money have I made (in dollar terms)?arrow_forwardEconomists assert that financial markets serve the function of efficiently allocating capital. What is meant by the function? Explain and include an example.arrow_forwardConsider a stock whose value increases across an 8-year period as shown in the table. Instructions: Round your answers to two decimal places. a. Calculate the percentage change in the value of the stock from year to year. Year Stock Value 1 $110.00 2 120.00 3 130.00 4 145.00 5 160.00 6 260.00 7 420.00 8 690.00 Percent Change % % % % % b. Calculate the percentage change in the value of the stock across the entire 8-year period. % c. Do you think this qualifies as a bubble? O No, because the percentage change in the stock value fluctuates up and down across the 8 years. O No, because the percentage change in the stock value has not increased. Yes, because the percentage change in the stock value is positive every year. ○ Yes, because the percentage change in the stock value has increased greatly.arrow_forward
- What is the value of a preferred stock that pays a perpetual dividend of $120 at the end of each year when the interest rate is 3 percent?arrow_forwardHomework (Ch 26) 1. Financial institutions in the U.S. economy Suppose Kenji would like to use $2,000 of his savings to make a financial investment. One way of making a financial investment is to purchase stock or bonds from a private company. Suppose TouchTech, a hand-held computing firm, is selling bonds to raise money for a new lab-a practice known as debt v finance. Buying a bond issued by Touch Tech would give Kenji an IOU, or promise to pay, from v the firm. In the event that Touch Tech runs into financial difficulty, Kenji and the other bondholders ▼ will be paid first. Suppose instead Kenji decides to buy 100 shares of Touch Tech stock. Which of the following statements are correct? Check all that apply. V Expectations of a recession that will reduce economywide corporate profits will likely cause the value of Kenji's shares to decline. O The price of his shares will rise if Touch Tech issues additional shares of stock. O The Dow Jones Industrial Average is an example of a…arrow_forwardWhy is it important for people who own stocks and bonds to diversify their holdings? What type of financial institution makes diversification easier?arrow_forward
- If the price of a government bond (gilt) traded on the stock market rises above its nominal value, which of the following statement must be true? 1 -The bond's coupon falls below the yield 2 - The bond's coupon rises above the yield 3-the bond's yield rises above the coupon 4 - the bond's yield falls below the couponarrow_forwardResponding to the economic conditions in the United Kingdom in 1932, Friedrich Hayek and his colleagues believed that it was important to boost aggregate demand, because doing so would reduce private savings. It was important to reduce private saving, because doing so would boost aggregate demand It was perilous to weaken private saving, because doing so might reduce government spending. it was perilous to weaken private saving, because doing so might reduce productive investment. Type the correct answer ASAP with proper explanation of the each option given. Thank youarrow_forwardThe relationship between a bond and its price is easier to determine than the relationship between a stock and its price.True or Falsearrow_forward
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