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Suppose that you re considering the purchase of a security that has the following timeline of payments:
Year Interest face value
1 600
2 600
3 600
4 600; 1000
a) How much would you be willing to pay for this security if his market interest rate is 6%?
b) Suppose that you have just purchased the security, and suddenly the market interest rate falls to 5%. What is the security worth?
c) Suppose that one year has elapsed, you have received the first payment of 600$, and the market interest rate is still 5%. How much would another investor be willing to pay for your security?
d) Suppose that the two years have elapsed since you purchased the security, and you have received the first two payments of $600 each. Now suppose the market interest rate suddenly jumps to 10%. How much would another investor be willing to pay for your security?
How does an increase in interest rates affect the present value of a future payment? How does an increase in the size of a future payment affect the present value of a future payment?
Assume you are compiling your research report. How would you present the statistical information within this case to the IndustryWeek decision maker, the manager who must decide whether or not to continue to publish reader service cards?
Illustrate how increase in human capital affects production function. Blue line (circle symbols) in graph below shows production function.
Government increases its spending by $2 billion and raises taxes by $1billion. Illustrate what happens to equilibrium income.
Evaluate why only the convexity of preference relation cannot guarantee that the indifference curve is strictly convex to the origin.
If the nominal interest rate in Japan remains unchanged, what happens to the interest rate paid on Korean deposits.
Prime Products manufactures specialized goods to customers' specifications and operates a job-order costing system.
Illustrate would be the effect on D' of decreasing the variable cost per unit by 25% if the fixed costs thereby increased by 10%.
q.assume that the economy is in a long run equilibrium where the inflation rate is greater than the optimal rate i as
Suppose that the market price for a bottle of vitamins is $2.50 and that at that price the total market quantity demanded is 75,000,000 bottles.
Elucidate causes lags in effect of monetary and fiscal policy on aggregate demand. what are the implications of these lags for the debate over active versus passive policy.
Compute the (point) price elasticity of demand when price is $700. Is demand elastic or inelastic. Find the point at which point elasticity is equal to -1.
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