Suppose as a hypothetical scenario that you deposit $400 today into a savings account with a variable interest rate and will collect a payment in one year. True or False: If over the course of the year the interest rate falls, this increases the future value of your investment. True False
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- Suppose Latasha is a sports fan and buys only baseball caps. Latasha deposits $3,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a baseball cap is priced at $10.00. Initially, the purchasing power of Latasha's $3,000 deposit is baseball caps. For each of the annual inflation rates given in the following table, first determine the new price of a baseball cap, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Latasha'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 baseball cap. For example, if you find that the deposit will cover 20.7 baseball caps, you would round the purchasing power down to 20 baseball caps under the assumption that Latasha…Betty will need $12,000 in five years to pay for a major overhaul on her tractor engine. She has found an investment that will provide a 5% return on her invested funds. How much does Betty need to invest today so she will have her overhaul funds in five years?Suppose you have a monthly income of $1000, $850 in monthly expenses, and you can put money in a savings account that yields a monthly interest rate of 4%. Now suppose you have an opportunity to invest your money at a 12% return. Further suppose you are able to borrow at 3%. Assuming you invest all of your money and then borrow against your future payout, show your trade-off between present and future consumption. If you still need to consume $850 in the present, how much will you have to spend in the future?
- This person earns $1000 of income today and $2000 income next year. Point C represents his consumption if he doesn't borrow or lend. If the interest rate is 10%, his Consumption Next Year at Point A is? Consumption Next Year B Consumption TodayThe disposable income from your part-time job in 2019 was $18,800. In 2018, you borrowed $700 at 14 percent interest. You repaid your loan with interest in 2019. How much would you have available for spending in 2019? (Do not round intermediate calculations.)Please do your own work, don't copy from the internet Q2) 2, You invest $3,000 for three years at 12 percent. a. What is the value of your investment after one year? Multiply $3,000 × 1.12. b. What is the value of your investment after two years? Multiply your answer to part a by 1.12. c. What is the value of your investment after three years? Multiply your answer to part b by 1.12. This gives your final answer. Combine these three steps by using the formula to find the future value of $3,000 in 3 years at 12 percent interest.
- Let p(t)= t2+1 represents a flow of income over time t from 1 to 4. Compute the Present Value (PV) of this flow if the interest rate is r=2.Suppose that Tyler wants to buy a house and is thinking of using $20,000 that sits in a retirement account for a down payment on this new home. Using the $20,000 as a down payment will reduce Tyler's income when he retires in 30 years. If Tyler can earn an 8%8% annual return on his money if he leaves it in the retirement account, how much will his consumption in retirement be reduced if he uses this money for a down payment now?A zero-coupon bond is a bond that is sold for less than its face value (that is, it is discounted) and has no periodic interest payments. Instead, the bond is redeemed for its face value at maturity. Thus, in this sense, interest is paid at maturity. Suppose that a zero-coupon bond sells for $8,500 and can be redeemed in 20-years for its face value of $38,000. What is the annual compound rate of return? Annual compound rate = % (Round to two decimal places as needed.)
- Consider two projects: Project A currently costs $15 million, which is to be paid this year. The returns are $10 million in one year and $8 million in two years. Project 8 currently costs $13 million, again to be paid this year. The returns are $9 million in one year and $8 million in two years. At an interest rate of 6%, the net present value of Project A is roughly while the net present value of Project B is roughly Suppose investing in one project eliminates the opportunity to invest in the other. If the interest rate is 6%, Project is preferable.Question 4 The equivalent rate of interest for a discount rate of 10.5% for 60 days is 104.9825%. Hint: An interest rate r and discount rate d are said to be equivalent if these two simple rates give the same present value for an amount due in the future. Thus, r = d/(1 - dt) and d = r/(1 + rt)Susie Lee won a lottery. She will have a choice of receiving $25,000 at the end of each year for the next 30 years, or a lump sum today. If she can earn an annual return of 10 percent on any investment she makes, what is the least she should be willing to accept today as a lump-sum payment? (Round to the nearest hundred dollars.) Use the NPV as you have equal cash flows of $25,000 for the next 30 years.
