Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 19, Problem 3CQQ
To determine
Calculation of the present value of money.
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Students have asked these similar questions
Which of the following has the highest future value?
A.
$100 saved for 2 years at 10 percent interest
B.
$130 saved for 2 years at 7 percent interest
C.
$120 saved for 2 years at 8 percent interest
D.
$110 saved for 2 years at 9 percent interest
Hector puts $150 into an account when the interest rate is 4 percent. Later he checks his balance and finds he has about $168.73. How long did Hector wait to check his balance?
A. 3 years
B. 3.5 years
C. 4 years
D. 4.5 years
In five years, you want to be able to buy a new car for $30,000. If the interest rate is 3 percent a year, what is the present value of this sum?
A.
$30,000.00
B.
$25,500.00
C.
$25,878.26
D.
$34,778.22
Chapter 19 Solutions
Essentials of Economics (MindTap Course List)
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Similar questions
- You open a 5-year CD for 1,000 that pays 2 interest, compounded annually. What is the value of that CD at the end of the five years?arrow_forwardTo pay off your student loan, you must pay $10,000 at the end of the year for the next three years. The interest rate is 5 percent a year. What is the present value of these payments? A. $30,000.00 B. $27,232.48 C. $8,638.28 D. $29,100.00arrow_forwardAkhisha wanted to buy a cell phone which will have a price of P13,000 for 90 days from now due to the increase in prices of 12 percent simple interest. What is the present worth of a cell phone? a. P15,621 b. P12,621 c. P13,621 d. P14,621arrow_forward
- 6. Alex invested a certain amount to a business and promised to pay him back with 1.8 times his original investment. They agreed to have it compounded monthly within 9 years. What is the nominal rate of interest r in percent?arrow_forwardWhat is the present value of $100 paid two years from now when the interest rate is 10 percent? A. $100 B. $90.91 C. $82.64 D. $75.13arrow_forwardWhen Andrew was 10 years old, his mother invested $50,000 to use for his college education seven years later. After seven years, how much money did Andrew have if the interest rate was 2 percent a year? A. $57,434.28 B. $50,357.00 C. $50,000.00 D. $43,528.01arrow_forward
- 11. The face value of a bond is $10,000, and the annual coupon payment is $850. What is the coupon rate?arrow_forwardCompounding refers to: Select one: a. the increased value of an investment that arises from the payment of periodic interest. b. the process of earning interest on both the interest and the principal of an investment. c. the paying back of both interest and principal during the life of a fixed-payment loan. d. the calculation of interest rates after the compounding effect of taxes has been allowed for.arrow_forwardIf the interest rate is 10 percent, the present value of an annual payment of $100,000 to be received indefinitely is: a. $976,463. b. infinite. c. $1,000,000. d. $2,000,000. e. $1,246,296.arrow_forward
- 4arrow_forwardAnnuity Suppose that you are thinking of buying a car that yields a rental of $5,000 each year for 3 years and then can be sold for scrap value of $8,000. With an interest rate of 10 percent, how much would we be willing to pay?arrow_forwardWhich of the following should give you better returns? a. One and a half years rate of interest of 8 percent b. Semi-annual 4 percent rate of interest for 2.5 years c. Quarterly rate of interest of 5% for 2 yearsarrow_forward
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