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1. Consider a one-year discount bond that pays $2,000 one year from now. If the rate of discount is 3 percent, calculate the present value of the bond. 2. Consider a one-year discount bond that has a present value of $3,000. If the rate of discount is 5 percent, calculate the future value of the bond (the amount the bond pays in one year). 3. Consider a perpetuity that pays $300 every year. If the rate of discount is 6 percent, calculate the present value of the bond. 4. Consider a fixed-payment security that pays $250 at the end of every year for eight years. If the rate of discount is 3 percent, calculate the present value of the bond. 5. Consider a coupon bond that pays $150 every year and repays its principal amount of $2,000 at the end of six years. If the rate of discount is 7.5 percent, what is the present value of the bond? 6. Consider a coupon bond that pays $350 every year and repays its principal amount of $5,000 at the end of four years. If the rate of discount is 6 percent, what is the present value of the bond? 7. Answer the questions below. Chapter 4: Present Value 55 a. You are negotiating a book deal for your newest novel in which an economist single-handedly saves the world. The publisher offers to pay you an advance of $1 million today plus $500,000 at the end of each of the next three years. What is the present value of these payments, given your rate of discount of 5 percent? Show your work. You may round to the nearest thousand dollars. b. You counter the publisher's offer with a counteroffer that will pay you $1.5 million today plus $5 per book sold in each of the next three years. You think you will sell 80,000 books each year in that period, but the publisher thinks you will only sell 40,000 books each year. Explain why both you and the publisher like this counteroffer better than the deal in part a. Show your work. 8. You borrow $30,000 for 10 years to pay tuition and fees. The annual interest rate is 12 percent. What monthly payment would be required to pay off the loan
a. why might fire extinguishers exhibit positive externalities b. draw a graph of the market for fire extinguishers, labeling the demand cruve, the social-value curve, the supply curve, and the social cost curve.
Calculate the change in welfare compared to the free market outcome (i.e., in the absence of minimum wages). Is this a welfare gain or a loss?
Estimate the regression model (E) using the OLS estimator and provide a summary report of the result (i.e., the estimated equation with the standard errors and/or t-ratios with other relevant statistics).
Using the AD-AS model, if consumers and business become more optimistic about the future direction of the economy and increase spending, then: aggregate demand will decrease, aggregate demand will increase.
Is the firm minimizing costs? If not, what steps should it take to lower costs and still produce the same level of output?Is the firm minimizing costs? If not, what steps should it take to lower costs and still produce the same level of out..
Fronterra, created in 2001 by New Zealand lawmakers, profits some 13,000 dairymen instead of all the citizens of the nation.
The most obvious benefit of specialization and trade is that they allow us to work more hours per week than we otherwise would be able to work or else.
Social Security benefits are increased each year in proportion to the increase in CPI, even though most economists believe that the CPI overstates actual inflation. If the elderly consume the same market basket as other people.
A local cable company, the sole provider of cable television service, is regulated by the municipal government. The owner of the company claims that she is normally opposed to regulation by government, but asserts that regulation is necessary beca..
1. Why might federal spending on roads, waterways, or national security be less subject to direct expenditure off sets than spending on health care or education 2.What might account for the fact that estimates of effect time lags for fiscal p..
Employees at Foxconn factories described in the e-Activity worked more hours than allowed under Chinese labor laws. Yet the violation of these standards is widespread in manufacturing and the demanding treatment of workers is commonly accepted. Co..
If the government knew the cost of reduction for each firm, what reductions would it impose to reach its overall goal What would be the cost to each firm and the total cost to the firms together
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