Exam 16: Interest Rates, Investments, and Capital Markets

In an economy with no inflation,explain why interest rates are positive.

Four banks are offering the same interest rate of 4%.Where do you invest?

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

Suppose we know that 10 Spanish Galleons sunk in the Atlantic ocean carrying approximately 50 tons of gold,but the exact location of these shipwrecks is unknown.Would this gold add to the world reserve?

If you place $100 in a bank account that pays 6% at the end of each year,and you leave your $100 and all your interest in the bank,how much will you have in the bank at the end of 7 years with annual compounding?

If an exhaustible resource is priced at marginal cost that remains constant over time,then

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

In the later part of the twentieth century,the price of crude oil began to increase after decades of relatively steady prices,which of the following could explain this phenomenon?

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

As the baby boomer generation retires and takes money out of their retirement accounts,what is expected to happen to the interest rate,ceteris paribus?

Technological improvements in coal mining will

If extraction technology continues to improve over time,

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%?

If savers require a 2% return and inflation is expected to be 3%,what approximate rate will banks offer savers?

During the Iraq War,the U.S.government continued to borrow funds and yet the interest rate was steady or slightly declined.What could explain this?

Which of the following is most likely to cause the demand curve in the capital market to shift leftward?

Interest rates are positive because inflation makes purchases more expensive in the future than today.

If inflation turns out to be higher than was anticipated,

Suppose a new cost-saving device will forever generate $1,000 net savings per year to a firm.The device costs $10,000.Using the Internal Rate of Return approach,the firm will make the investment

Suppose that your college offers you two payment plans for your last two years of college.You may either pay tuition of $20,000 per year at the beginning of each of the next two years,or pay just $38,000 before the start of freshman year.What would the interest rate have to be for you to be indifferent between these two deals? Explain.