Exam 16: Interest Rates, Investments, and Capital Markets

Which of the following is most likely to cause interest rates to fall?

You won the "$1,000 per year forever" lottery.You decided to convert such prize into a lump sum payment.The interest rate is 2% per year.How much is this lump sum payment ?

If a recession were to reduce the demand for loans,ceteris paribus,

An individual who wants to stop smoking but chooses not to

Which of the following is an example of an exhaustible resource?

An exhaustible resource with a very large known reserve will most likely exhibit

A firm has to decide between two projects that cost $10,000 each.Project A will provide a revenue $10,700 one year from now,while Project B will provide a revenue of $12,200 two years from now.The interest rate is 10% per year.This firm

Suppose there is no inflation,and the current interest rate is 4% per year.Erin plans to open a savings account and deposit $100 annually for the next 5 years.She plans to leave this money untouched for 10 more years.At the end of the period,the balance of her savings account will be

For a given rate of interest,the total interest you receive from lending money

A government policy that lets individuals put away money for retirement tax-free will

Investment demand is downward sloping because as the interest rate decreases,

The spread between price and marginal cost of an exhaustible resource must grow by the rate of interest so that

In using the Internal Rate of Return approach,one must first calculate the discount rate on the investment that makes

A government policy that makes investments prior to retirement tax exempt until retirement increases the amount saved at any given interest rate.

Suppose households decide to reduce savings because they want to enjoy more present time than future time.In this case,the loanable funds model predicts that

At age 40,Joe is considering quitting his job and going back for a college degree.He needs two more years full-time.Tuition is $10,000 per year.He earns $30,000 per year.A college degree would raise his annual income by $10,000 per year.He will retire at age 70.His benefit of a degree would be

If the interest rate received in Mexico is greater than that obtained in the United States,

A major corporation hires high school students on a part-time basis.It offers a reward of $5,000 to any of its high school seniors who graduate college in four years.What is the present value of that reward to a student who just finished her junior year of high school,assuming a nominal rate of interest of 8%?

To calculate the internal rate of return on a factory that would yield a perpetual future stream of income,one would divide

What is the internal rate of return on a new $2,000 heater that would reduce your heating costs by $200 a year forever? Under what conditions would you make the purchase?