Exam 16: Interest Rates, Investments, and Capital Markets

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.From an investment standpoint,Joe will go back full-time if

Which of the following is most likely to cause the savings supply curve in the market for loanable funds to shift leftward?

Alchemy was the attempt to discover a process by which base metals,such as lead,could be turned into gold.If an alchemist had been successful,

If inflation turns out to be higher than was anticipated,debtors are helped because

If an asset has a present value of $50 and appreciates at an interest rate of 4%,what is the asset's future value in 47 compounding periods?

If your bank pays you 6% interest on a savings account and inflation is 2%,your approximate real rate of interest is

Assume a baseball player's development in the minor leagues yields -$250,000 per year for four years.If the player were to have a single big league season and be paid $350,000,how much revenue would the player need to generate to be considered a positive net present value project from the point of view of the team owner if the interest rate was 4%?

Why do economists predict that investment increases when the real rate of interest falls?

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

A firm has to choose between projects X and Y.Project X's internal rate of return is positive.If the cash flow of project Y is discounted at project X's internal rate of return,this firm will

If you agree to a long-term loan at a specified nominal rate of interest and inflation turns out to be higher than was anticipated,

What is one reason for the high interest rates for home loans offered to those with low credit ratings?

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

Suppose two people with the same level of income and wealth have different discount rates.Joe has a very high discount rate and Jim has a very low discount rate.Which one of the following is TRUE?

A financial services company offers to pay you $1,000 a year for life in exchange for $20,000 today.What factors affect your decision to take this offer?

Suppose a new cost-saving device will generate $1,000 net savings per year to a firm.The device costs $10,000.Should the firm purchase the device?

Explain how continuing technical progress may cause the price of scarce,exhaustible resources to fall over time.

How does a decrease in government budget deficits affect the equilibrium interest rate in the loanable funds model?

An investment is profitable as long as its internal rate of return is equal to the rate of interest.

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