Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 19, Problem 1PA
To determine
Calculation of
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
Angela puts $5,000 in a savings account that pays 5 percent per year.
The future value of her money one year from now is $
As the interest rate
(Enter your response as a whole number.)
the future value of Angela's $5,000 savings will increase.
A company in real estate sold a house about 200 years ago for $20. If they had invested this amount at an interest rate of 10
percent per year, 2. how much would they have today? The same company has an investment project that would cost $25
million today and yield a payoff of $30 million in 3 years. Should the firm undertake the project if the interest rate is 8
percent? 6 percent ? Can you figure out the exact cutoff for the interest rate between profitability and non profitability? 3.
The same company has an investment project that would cost $25 million today how many years will take to yield a payoff
of $30 million with 9.5%?
Gail has won a lottery that pays her $100,000 at the end of this year and increases by 15 percent per year thereafter for 30 years. Leon has offered Gail $10,500,000 today in exchange for all the money she will receive. If Gail can get 6 percent interest on her savings, is this a good deal? What is the present value of the lottery winnings?
Chapter 19 Solutions
Essentials of Economics (MindTap Course List)
Knowledge Booster
Similar questions
- The Kelowna Go-Kart Klub has decided to build a clubhouse and track five years from now. It must accumulate $50 000 by the end of five years by setting aside a uniform amount from its dues at the end of each year. If the interest rate is 10 percent, how much must be set aside each year?arrow_forwardTo triple $1 million, Theo invested today at an annual rate of return of 9 percent. How long will it take Mika to achieve his goal?arrow_forward13. If Ginger Rayle was offered $4,000 five years from now in return for an investment of $1,000 currently, what annual rate of interest would she earn if she took the offer? 14. When you complete your MBA, you will treat yourself to a new car. The car you want to buy costs $25,000 and you have enough to put 20% down in cash. You can take out a loan for the rest of the cost of the car. Calculate your monthly car payments assuming the auto finance department states that the annual interest rate on the car loan is 8% and you pay the loan over a 3-year period.arrow_forward
- Question 54 At an annual interest rate of 14 percent, about how many years will it take $100 to double in value? 3 10arrow_forwardElroy Harris is considering whether to buy a corn and soybean farm in Iowa. The farm will cost $800,000, and Xander will be able to pay this from profits his recently deceased mother made on the stock market and willed to him. He estimates that if he does not run the farm, and keeps his current job as an economic forecaster, he will be able to earn $40,000 a year. The prevailing interest rate is 9 percent. Xander’s only motive is to maximize his income. His accountant tells him the annual profit from the farm is likely to be depending on certain conditions and assuptions: Scenario i) $160,000 of accounting profit Scenario ii) $100,000 of accounting profit Scenario iii) $50,000 of accounting profit Using the concept of positive economic profit, which of the three scenarios would the economic opportunity cost justify him taking up farming and quitting his job as an economic forecast. Show your work and calculationsarrow_forwardWhat are some reasons why the investment strategy of a 30-year-old might differ from the investment strategy of a 65-year-old?arrow_forward
- Q) A star baseball player signs a contract that would pay a total of $16 million. The player receives $4 million upon signing, and $3 million every year for the next four years. (In other words, the player will receive $4 million today, $3 million in a year from today, etc.)At an interest rate of 4 percent, the sum of the present value of the contract is $__. Your answer should be a whole number. If the contract is spread over fewer years, the present value of the contract would __________ (options: increase or decrease)arrow_forwardWhat group of people benefits from a higher interest rate? Explain how they benefit.arrow_forwardJack just discovered that he holds the winning ticket for the $87 million megalottery in Missouri. Now he needs to decide which alternative to choose: (1) a$44 million lump-sum payment today or (2) a payment of $2.9 million per yearfor 30 years. The first payment will be made today. If Jack’s opportunity cost is5 percent, which alternative should he choose? Please show calculation using excelarrow_forward
arrow_back_ios
arrow_forward_ios
Recommended textbooks for you
Principles of Economics, 7th Edition (MindTap Cou...EconomicsISBN:9781285165875Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics (MindTap Course List)EconomicsISBN:9781305585126Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781305971509Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)EconomicsISBN:9781285165912Author:N. Gregory MankiwPublisher:Cengage Learning
Essentials of Economics (MindTap Course List)EconomicsISBN:9781337091992Author:N. Gregory MankiwPublisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...EconomicsISBN:9781337091985Author:N. Gregory MankiwPublisher:Cengage Learning
Principles of Economics, 7th Edition (MindTap Cou...
Economics
ISBN:9781285165875
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781305971509
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Macroeconomics (MindTap Course List)
Economics
ISBN:9781285165912
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning