Microeconomics
21st Edition
ISBN: 9781259915727
Author: Campbell R. McConnell, Stanley L. Brue, Sean Masaki Flynn Dr.
Publisher: McGraw-Hill Education
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Chapter 8, Problem 4P
To determine
Efficiency of choice.
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Suppose a person has a total credit card debt of $1,100 that has a 11 % yearly interest rate. This person also has a savings account with $5,500
that pays 1 % interest per year. Despite the net loss, the person keeps both.
Calculate how many times the person appreciates the $1 of savings more than $1 of credit card debt if the person relates similarly to both values of
percent paid and received, Enter your answer in the box below and round to two decimal places if necessary.
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Joanne has just completed high school and is trying to determine whether to go to communtiy college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $18,500 per year for each of the next five years. If she goes to community college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from community college, in each of the subsequent three years, her wages will be $35,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Joanne should go to (Click to select) work junior college , since the total value of Joanne's savings would be $__ if she goes directly to work and $__ if she goes to community college.
Suppose Dalia is a sports fan and buys only football tickets. Dalia deposits $3,000 into a savings account that pays an annual nominal interest rate of
5%. Assume this interest rate is fixed, and so it will not change over time. On the day she makes her deposit, suppose that a football ticket has a
price of $15.00.
Initially, Dalia's $3,000 deposit has a purchasing power of
200 football tickets.
For each of the annual inflation rates given in the following table, first determine the new price of a football ticket, assuming it rises at the rate of
inflation. Then enter the corresponding purchasing power of Dalia's deposit after one year in the first row of the table for each inflation rate. Finally,
enter the value for the real interest rate at each of the given inflation rates.
Hint: Round your answers in the first row down to the nearest football ticket. For example, if you find that the deposit will cover 20.7 football tickets,
you would round the purchasing power down to 20 football…
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