Suppose your rich relative promises you the choice between $20,000 today and a delayed graduation gift of a $45,000 in four years time. Assume that the interest rate is 5 per cent. *Compare the present discounted value of the delayed gift versus the immediate gift.   *What is the interest rate that would equalize the present discounted value ofthe two gifts? What happens as interest rates become higher than this value?

Q: Suppose the current economy requires $7 million for transactions. The table below shows the interest…

A: Transaction demand for money refers to money held by people for the purpose of everyday…

Q: a. The present value of $25,000 each year for 4 years at a / percent interest rate b. The present…

A: The formula for calculating the Future Value is: FV= PV(1+r)nwhere,FV= Future ValuePV= Present…

Q: Solve for the rate of discount : A man borrowed P 2,000 from a bank and promise to pay the amount…

A: Principal amount = P2000 Amount received = $1800 Advance interest collected by bank = P70

Q: How would the price of the bond be affected by changing the going market interest rate? (Hint:…

A: Interest rate  Interest rates are set by the interaction between the supply and demand for money in…

Q: In economics it is said that two items are substitute items if the Q1 demand for the first grows…

A: There are two goods Q1 and Q2 . Price of good Q1 is P1 and price of good Q2 is P2 .  These goods are…

Q: The accompanying table shows Francesca's estimated annual benefits of holding different amounts of…

A: The marginal cost is the change in the total cost that arises when the quantity produced is…

Q: Diamond & Turf Inc. is considering an investment in one of two machines. The sewing machine will…

A: Net Present Value: It is the total value of the cash flows that will occur in the future. Moreover,…

Q: If the interest rate is 8 percent, the present value of $200 paid one year from now equals $ If the…

A: Present value is the value of investment in today's dollar.  Future value is the value of investment…

Q: Ali is planning to borrow $25,000 from a bank for 1 year at 8% interest for his personal work. The…

A: We have formula for interest rate. P = A(1+r)t Where P = principle  A = amount = 25000 t = year r =…

Q: Consider a perpetuity with a coupon of 100. Imagine that the perpetuity is purchased at time t when…

A: Given Information Rate of interest is 5%The income tax rate is 40%

Q: The interest rate is 6 percent a year and you expect to receive $1,000 next year and the following…

A: Given  Rate of interest =6% per year First-year end, we expect to receive $1000 and the following…

Q: Bertrand is a worker in Canada with a continuous income stream at the rate of 650e dollars per year.…

A: Given, Income stream rate = 650et

Q: ADVANCED ANALYSIS To fund its wars against Napoleon, the British government sold consol bonds. These…

A: A perpetual bond , also called consol bond signifies a bond who yields a fixed amount of income for…

Q: You borrowed P5,000 from a bank and agreed to pay at the end of 9 months. The bank discounted the…

A: The rate tells you just how much interest you'll make or pay on a loan. Rate is the percentage that…

Q: H6. a. what is the present value of a two year income stream $10,000 in year 1 and $10,000 in year 2…

A: Present Value refers to the value of a series of income streams or series of cash payments…

Q: Josh wants to save for his college education. He plans to make equal monthly deposits for four…

A: Formula for the future value of an annuity is given as FV = A * [ (1+r)n - 1r]

Q: Suppose that interest payments are $150 per year on a $2,000 loan and $1200 her year on an $15,000…

A: We need to determine the interest rates on the two loans.We can calculate the interest rates using…

Q: The interest rate is 6 percent a year and you expect to receive $1,000 next year and the following…

A: Given interest rate = 10 % Amount to be received next year = 1000$

Q: You are considering taking out a two-year loan of$1,000 from a bank, on which you can pay…

A: Case 1 : Compound yearly interest Principal (P) = $1,000 Interest rate (r) = 1% Time period (t) = 2…

Q: In one year you will receive $800. This future payment has a present-day value of $600. What is the…

A: In one year you will receive $800 The present value is $600 -------------------------------------…

Q: Suppose that the market interest rate in an economy is 7 percent and a bond promises to pay $615…

A: The present value is a financial concept that refers to the current worth of a future sum of money,…

Q: 10. Suppose the interest rate is 5% and that you are to receive three annual payments of $10,000,…

A: The present value is an important financial concept popularly used by business firms and individuals…

Q: Suppose that the interest rate is 4 percent. What is the future value of $100 four years from now?…

A: Interest rate = 4%Principal amount = $100

Q: Hi! Can you help me with the question below? Matt has the choice between receiving $100 now or…

A: Matt has the choice between receiving $100 now or receiving $140 in two years. Simple interest…

Q: Evaluate (discussing positives and negatives of) the effect of interest rates on consumer choices.

A: Interest rate: - it is the percentage charge on the principal amount by a lender to a borrower.

Q: Suppose you win a raffle held at a minor league baseball game and are given the choice between two…

A: Present worth (PW) converts the set of future worth to the equivalent set of present sums in terms…

Q: Which lottery payout scheme is better? suppose you win a raffle held at a neighborhood elementary…

A: Present worth (PW) converts the set of future worth to the equivalent set of present sums in terms…

Q: (Calculating the present value of an annuity due) What will be the present value of an annuity due…

A: Both parts are given below

Q: Example [2] & Consider a scenario where you deposited a $1,000 in a savings account that pays $500…

A: PV = 1000 Bank Pays 500 in 3rd Year and 1500 in 5th Year

Q: 1. Suppose your rich relative promises you the choice between $30,000 today and a graduation gift of…

A: Given- n=4 r=10% By calculating the present values of the both gift we can compare the gifts and…

Q: O If the market interest rate (i) increases today, the Price of a Bond (P) today will decline. The…

A: The coupon bonds are the bonds in which the interest rate that the bonds pays to the holders will be…

Q: Your parents give you an allowance of 100 pounds for this year and 110 for the next. Credit markets…

A: The rate could be a proportion of the principal—the quantity borrowed—that an investor charges a…

Q: 5. Suppose after you graduate from Algoma University, you find a job that pays you $75,000 a year.…

A: Case-1 no.of years n=30years=30*12=360months   Interest rate (i) =3.5% per year = 0.35/12 = 0.00292…

Q: Janelle is an investor looking at the bond market for an investment opportunity. If Janelle knows…

A: Given:1 year interest rate for the next 3 years are;4%, 2%, 3%Premium paid to the holder in 3rd…

Q: Please show work

A: The Future value of lottery amount is $500,000 in 35 years.Interest rate is 5%.

Q: Phineas and Ferb agree to split the rent for their new apartment. Instead of each paying half each…

A: A positive interest rate is an interest rate that is greater than zero. This implies that lenders…

Q: An investor purchases a 30-year U.S. government bond for $840. The bond’s coupon rate is 10 percent…

A: Yield to Maturity, sometimes referred to as redemption yield or book yield, is nothing more than the…

Q: 51. Permanent Income and winning the lottery. Remember to explain the reasoning behind your answers.…

A: a. Because of consumption smoothing the consumption will be split across the periods in such a way…

Q: Present value can be used to determine the fair price -or value - of a bond. In the examples that…

A: (a) Price of Zero Coupon Bond: Given that- Future value = $225 Current interest rate, r = 3% or…

Q: An individual's current income is $50,000 the person expects next period (future) income to be…

A: The budget constraint is the locus of all affordable consumption bundles at the given income of the…

Q: Suppose you win the Powerball lottery this year, which is worth $500 million. You can choose to take…

A:

Q: what are four different factors that would increase a bonds price, but not by interest rates or…

A: Bonds and interest rates have an inverse relationship, meaning that when interest rates rise, bond…

Q: Harper is a short-lived human who only lives for two years: current year and next year. In the…

A: Time period (life of Harper) = 2 years First year income = $189 First year tax = $36 Second year =…