Please answer Consider a policy that has benefits and costs that accrue in the following way:Year 0: Benefits = 0, Costs = 100Year 1: Benefits = 20, Costs = 20Year 2: Benefits = 40, Costs = 20Year 3: Benefits = 60, Costs = 20Year 4: Benefits = 75, Costs = 20If the social discount rate is 8%, then the net present value of the policy is $_.Please round your final answer to two digits if necessary.Answer:

The Net Present Value (NPV) of the policy can be calculated by using the following formula.…

Consider a policy that has benefits and costs that accrue in the following way: Year 0: Benefits = 0, Costs = 100 Year 1: Benefits = 20, Costs = 20 Year 2: Benefits = 40, Costs = 20 Year 3: Benefits = 60, Costs = 20 %3D Year 4: Benefits = 75, Costs = 20 %3D If the social discount rate is 8%, then the net present value of the policy is $__. Please round your final answer to two digits if necessary.

Consider a policy that has benefits and costs that accrue in the following way: Year 0: Benefits = 0, Costs = 100 Year 1: Benefits = 20, Costs = 20 Year 2: Benefits = 40, Costs = 20 Year 3: Benefits = 60, Costs = 20 %3D Year 4: Benefits = 75, Costs = 20 %3D If the social discount rate is 8%, then the net present value of the policy is $__. Please round your final answer to two digits if necessary.

Microeconomics A Contemporary Intro

10th Edition

ISBN:9781285635101

Author:MCEACHERN

Publisher:MCEACHERN

Chapter13: Capital, Interest, Entrepreneurship, And Corporate Finance

Section: Chapter Questions

Problem 13PAE

See similar textbooks

Similar questions

10. What is the present value of a perpetuity of $100 if the appropriate discount rate is 7%? If interest rates in general were to double and the appropriate discount rate rose to 14%, what would happen to the present value of the perpetuity?
Using the following data, calculate the equilibrium interest rate Y=7,000G=4000T=2,000C=150+0.75(Y-T)I=1,000-50rPublic Savings = -2000Private savings = 1100National Savings = -900
Calculate the present value of each cashflow using a discount rate of 7%. Which do you most prefer most? Show and explain all supporting calculations! Cashflow A: receive $60 today and then receive $60 in four years. Cashflow B: receive $12 every year, forever, starting today. Cashflow C: pay $50 every year for five years, with the first payment being next year, and then subsequently receive $30 every year for 20 years. Cashflow D: receive $9 every other year, forever, with the first payment being next year.
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. Answer Keypad Keyboard Shortcuts times
Economics You are planning to take out a 5 hundred thousand dollar fixed-rate mortgage with a 30- year term and a stated annual mortgage rate of 5.7 percent. Your lender offers to lower your stated annual interest rate by one-quarter of a percentage point for each discount point you buy. What will your monthly payment be if you buy 3 discount points? Round your answer to the nearest dollar. Answer the following based on the information from the previous question. Approximately how many months do you need to stay in the mortgage to make it worthwhile to pay the discount points? Round your answer to two decimal places.
1) Assuming that the current interest rate is 3 percent, compute the present value of a 5-year, 5 percent coupon bond with a face value of $1000. What happens when the interest rate goes to 4 percent? 2). Which of these $100 face value one-year bonds will have the highest yield to maturity and why? a. A 6 percent coupon bond selling for $85. b. A 7 percent coupon bond selling for $100.
Suppose that you purchase a 2 year coupon bond at the time it is issued for $1100. The face value of the bond is $1000, with annual coupon payments of $80. a. What is the bond’s “coupon rate”? b. What is the bond’s “current yield”? c. What is the bond’s (nominal) “yield to maturity”? d. If you hold the bond for 1 year and sell it for $1035 (after collecting the first coupon payment), what is your “holding period rate of return”? Please answer all part otherwise Dounvote
1. Suppose that people expect the one-year interest rate will equal 1% forever. a. Consider a ten-year zero coupon (discount) bond with a face value of $1000. The bond has a current price of $910. Is the term premium positive or negative? b. Redo question (a), assuming that the bond has a current price of $900. c. Using FRED, plot the behavior of the term premium on a 10-year zero coupon bond over the past 25 years in the US.
a) Suppose you put $350 into a bank account today. Interest is paid annually and the annual interest rate is 6 percent. What is the future value of the $350 after 4 years? b) Suppose you are deciding whether to buy a particular bond from your local municipality. If you buy the bond and hold it for 4 years, then at that time you will receive a payment of $10,000. Assume the interest rateis6percent. Underwhatcircumstanceswillyoubuythebond?Meaninguptowhatpriceareyou willing to pay.
Bond A pays $8,000 in 20 years. Bond B pays $8,000in 40 years. (To keep things simple, assume that theseare zero-coupon bonds, meaning the $8,000 is theonly payment the bondholder receives.)a. If the interest rate is 3.5 percent, what is the valueof each bond today? Which bond is worth more?Why? (Hint: You can use a calculator, but the ruleof 70 should make the calculation easy.)b. If the interest rate increases to 7 percent, what isthe value of each bond? Which bond has a largerpercentage change in value?c. Based on the example above, complete the twoblanks in this sentence: “The value of a bond[rises/falls] when the interest rate increases,and bonds with a longer time to maturity are[more/less] sensitive to changes in the interestrate.”
Suppose a person has a total credit card debt of $1,380 that has a 15 % yearly interest rate. This person also has a savings account with $3,000 that pays 3 % 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. Answer 2 Pan E Keypad Keyboard Shortcuts times
ADVANCED ANALYSIS To fund its wars against Napoleon, the British government sold consol bonds. These bonds were called "perpetuities" because they would pay £4 every year in perpetuity (forever). Instructions: Enter your answers rounded to 1 decimal place. a. If a citizen could purchase a consol for £50, what would the consol's annual interest rate be? 12.0 * percent What if the price were £10O? 6.0 8 percent What if the price were £200? 3.0 8 percent