Public Finance (The McGraw-Hill Series in Economics)
10th Edition
ISBN: 9780078021688
Author: Harvey S Rosen, Ted Gayer
Publisher: McGraw-Hill Education
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Chapter 6, Problem 3DQ
Three voters, A, B, and C, will decide by majority rule whether to pass bills on issues X and Y. Each of the two issues will be voted on separately. The change in net benefits (in dollars) that would result from passage of each bill is as follows:
- a. Which issues (if any) would pass if decided by majority rule? Is this the efficient out-come?
- b. Which issues (if any) would pass if logrolling were allowed? Would logrolling improve efficiency? Would it result in the efficient outcome?
- c. Suppose that it were legal for one voter to pay another to vote a certain way. Would allowing such side payments improve efficiency from part b? Would it result in the efficient outcome?
- d. What amount of side payments would take place if paying for votes were allowed?
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John wants to buy a property for $105,000 and wants an 80 percent loan for $84,000. A lenderindicates that a fully amortizing loan can be obtained for 30 years (360 months) at 6 percentinterest; however, a loan fee of $3,500 will also be necessary for John to obtain the loan.a. How much will the lender actually disburse?b. What is the APR for the borrower, assuming that the mortgage is paid off after 30 years (fullterm)?c. If John pays off the loan after five years, what is the effective interest rate? Why is it differ-ent from the effective interest rate in (b)?d. Assume the lender also imposes a prepayment penalty of 2 percent of the outstanding loanbalance if the loan is repaid within eight years of closing. If John repays the loan after fiveyears with the prepayment penalty, what is the effective interest rate?
It is now January 1. You plan to make a total of 5 deposits of $500 each, one every 6 months, with the first payment being made today. The bank pays a nominal interest rate of 14% but uses semiannual compounding. You plan to leave the money in the bank for 10 years. Round your answers to the nearest cent.
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Chapter 6 Solutions
Public Finance (The McGraw-Hill Series in Economics)
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