Exam 11: Input Demand: the Capital Market and the Investment Decision

You are asked to lend a friend $20,000 for a year. At the end of the year your friend agrees to pay you $21,000. The interest rate on this loan is

An example of intangible capital is

Related to the Economics in Practice on page 238: An investor in the stock market experiences capital gains whenever

Tomʹs Donuts can invest in a new espresso machine that costs $500 and will yield expected profits of $350 each year for two years. At higher interest rates, the present discounted value of profits from the investment

If the interest rate is 6 percent, to get back $300 in two years you would need to deposit ________ today.

An investment should be undertaken

Tom's Donuts can invest in a new espresso machine that costs $300 and will yield expected profits of $200 each year for two years. What is the present discounted value of the expected profits from this investment if the interest rate is 5%?

You agree to lend a friend $20,000 for a year at an annual interest rate of 45%. At the end of the year your friend must pay you ________ in interest.

Firms that offer to pay for professional development for their employees are investing in ________ capital.

You lend a friend $20,000 for a year at an annual interest rate of 5%. At the end of the year your friend must pay you ________ in interest.

Refer to the data provided in Table 11.1 below to answer the following question(s). Table 11.1 Total Investment Expected Rate of Return Project (dollars) (percentage) New tablet computer for sales staff \ 500,000 22 Remodel for distribution center \ 400,000 18 On-site day care center \ 200,000 10 Employee fitness center \ 100,000 8 -Refer to Table 11.1. If the interest rate is 5%, Nashbar Bicycle should

As a holder of ________, you are entitled to a portion of the issuing party's profits.

You use $3,000 of your own money to start a dog-sitting service. During the first year you earn a 10% return on your investment. If the current interest rate on savings is 7%, you earn an economic profit of

The funds that firms use to buy capital come directly or indirectly from households.

An example of tangible capital is

In general, a firm will be likely to invest as long as the

The formula R/(1 + r)^t, where R is dollars, t is years, and r is the interest rate, is the formula for

Tomʹs Donuts can invest in a new espresso machine that costs $500 and will yield expected profits of $350 each year for two years. What is the present discounted value of the expected profits from this investment if the interest rate is 4%?

A firm should cut back on investing if

A university requires that all entering first-year students learn how to use word processing and spreadsheet software. This is an investment in what type of capital?