Ex-Ante Real Interest Rate8.0%7.5%7.0%6.5%6.0%5.5%5.0%4.5%4.0%3.5%3.0%2.5%2.0%1.5%1.0%0.5%0.0%DLF$0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140Quantity of Loanable Funds ($Million)The graph above shows a hypothetical loanable funds market. Currently themarket is in equilibrium. Lenders and borrowers expect the inflation rate for thenext year to be 2 percent and the nominal interest rate isSLFthe nominal interest rate changes tointerest rate equalspercent.Suppose that the government announces that it will reduce the inflation rate to 1percent. According to Fisher, this event creates an excess supply of loanable fundsequal tomillion dollars in the very short run. However, soonpercent.6.00percent and the real

Loanable Funds Market: In the market for loanable funds there are economic agents like governments,…

Ex-Ante Real Interest Rate 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% DLF $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 Quantity of Loanable Funds ($Million) The graph above shows a hypothetical loanable funds market. Currently the market is in equilibrium. Lenders and borrowers expect the inflation rate for the next year to be 2 percent and the nominal interest rate is 6.00 SLF percent. Suppose that the government announces that it will reduce the inflation rate to 1 percent. According to Fisher, this event creates an excess supply of loanable funds equal to million dollars in the very short run. However, soon the nominal interest rate changes to interest rate equals percent. percent and the real

Ex-Ante Real Interest Rate 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% DLF $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 Quantity of Loanable Funds ($Million) The graph above shows a hypothetical loanable funds market. Currently the market is in equilibrium. Lenders and borrowers expect the inflation rate for the next year to be 2 percent and the nominal interest rate is 6.00 SLF percent. Suppose that the government announces that it will reduce the inflation rate to 1 percent. According to Fisher, this event creates an excess supply of loanable funds equal to million dollars in the very short run. However, soon the nominal interest rate changes to interest rate equals percent. percent and the real

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Ex-Ante Real Interest Rate 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% 3.5% 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% DLF SLF $0 $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 $110 $120 $130 $140 Quantity of Loanable Funds ($Million) The graph above shows a hypothetical loanable funds market. Currently the market is in equilibrium. Lenders and borrowers expect the inflation rate for the next year to be 2 percent and the nominal interest rate is percent. Suppose that corporations expect better profit conditions in the future and, so, decide to borrow more $20 million more than before to invest in plants and equipment. At the same time, FDIC increases the amount of deposit insurance from $150,000 to $250,000 (as it did during the 2007-09 financial crisis). This reduces the credit risk for households and, as a result, more households keep their savings in their bank deposit accounts. The increase in the amount of bank deposits enables banks to lend more money to business firms and households. The…
1. Compute the net present value (NPV) of the following cash flows: End of Year Cash Flow, $1000 a. NPV = -2,633.99 The interest rate is 15% per year, compounded annually. b. NPV = = 2,633.99 0 C. NPV = 1,617.99 -6 1 4 2 2 3 -3 -2 5 3
Using Table 11-1, compute the amount of compound interest (in $) earned in 1 year and the annual percentage yield (APY) for the investment. (Round your answers to two decimal places.) Principal NominalRate (%) InterestCompounded Compound InterestEarned in 1 Year Annual PercentageYield (APY) $33,000 12 monthly $ %
2. An investor has a principal amount of $P. If he Interest Rate per Year desires a payout (return) of 0.1P each year, how many years will it take to deplete an account that earns 8% 4% 6% 8% 10% Payout per Year 10% (% of principal) 20% 30% 20.9 per year? 0.1P = P(A/P, 8%, N), so N ~= 21 years. A payout duration table can be constructed for select payout percentages and compound interest rates. Complete the following table. (Note: table entries are years.) Summarize your conclusions about the pattern observed in the table. (5.5)
20. What is the present worth of two P100.00 payments at the end of the third year and fourth year? The annual interest rate is 8% a. P 150.56 b. P 152.88 P 153.89 P 151.09 C. d.
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A businessman borrowed $1,900,000 from the bank to finance new equipment for his food co-packing factory. The loan is to be paid back in uniform annual payments at an annual interest rate of 4% over 24 years. Calculate the uniform annual payments OA. $127,870 OB. $129,580 O C. $45,600 D. $48,640 OE. $124,640 EXIB
Student Emergency Financial Services, Inc.,which makes small loans to college students, offersto lend $550. The borrower is required to pay $42 atthe end of each week for 16 weeks. Find the interestrate per week. What is the nominal interest rate peryear? What is the effective interest rate per year?
(11) An investment of $20,000 expected to produce an annual income of $5,000 for 10 years and to have asalvage value of $4,000 at EOY 10. What is the annual interest rate of this investment?
Q1) Consider the following cash flow: Year Cash Flow 0 -SP 1 1000 2 850 3 700 4 550 5 400 6 400 7 400 8 400 It is asked to compute the P value for the cash flow at a % interest. A. P=1000(P/A, a,8) - 150(P/G, a,8) + 150 (P/G, a,4) (P/F, a,4 B. P=400(P/A, a,8) + 600(P/A, a,5) - 150 (P/G, a,4) C. P=150(P/G, a,4) + 850(P/A, a,4) + 400 (P/A, a,4) (P/F, a,4) Which one is correct and compute P according to your choice. Note: a = St.No +1 (1 more of your student number's last digit)
You buy a share of stock that pays $5 in dividends for the next 5 years and nothing after that. If the interest rate is 5.5%, the present value of this series of payments is $21.35 $35.67 $3.83 $42.70
Mrs. Cruz who is just 30 years old is planning for her retired life. She plans to invest an equal sum of P 7000 at the end of every year for the next 30 years starting from the end of next year. The bank gives 11% interest rate, compounded annually. Find the value of his account when he is 60 years old. a. P 60, 856.55 b. P 578,907.45 c. P 90, 896.67 d. P 1, 393,146.15