Principles of Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134421315
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Question
Chapter 11, Problem 2.9P
(a)
To determine
Saving vs. Investment.
(b)
To determine
The stock, bond and investment.
(c)
To determine
The interest rate and investment.
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Students have asked these similar questions
One of the biggest problems for any economy is to figure out how to get or transfer money from people or firms who want to save (savers) to people or firms who want to borrow (investors).
Explain how financial markets can help to solve this problem efficiently.
Discuss how financial markets function and which tools they can offer to solve this problem.
Discuss how financial systems are of crucial significance to adequate capital formation, which is indispensable to a speedy economic growth and development.
"Knowing how to secure your financial well-being is one of the most important things
you'll ever need in life. You don't have to be a genius to do it. You just need to know
a few basics, form a plan, and be ready to stick to it. No matter how much or little
money you have, the important thing is to educate yourself about your opportunities.
At the SEC [Securities and Exchange Commission], we enforce the laws that
determine how investments are offered and sold to you. These laws protect
investors, but you need to do your part, too. No one can guarantee that you'll make
money from investments you make."
Use the excerpt from the SEC's Guide to Saving and Investing to answer the
following. Be sure to write in complete sentences.
Explain different types of investments and savings accounts and how they help your
money grow over time.
Describe the importance of government agencies, like the SEC, in protecting your
investments.
7. For each of the following, decide whether you agree or
disagree and explain your answer:
a. Savings and investment are just two words for
the same thing.
b. When I buy a share of Microsoft stock, I have
invested; when I buy a certificate of deposit, I have
not.
c. Higher interest rates lead to more investment
because those investments pay a higher return.
Chapter 11 Solutions
Principles of Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (12th Edition)
Ch. 11.A - Prob. 1PCh. 11.A - Prob. 2PCh. 11.A - Prob. 3PCh. 11.A - Calculate the present value of the income streams...Ch. 11.A - Prob. 5PCh. 11.A - Prob. 6PCh. 11.A - Prob. 7PCh. 11.A - Prob. 8PCh. 11.A - Prob. 9PCh. 11.A - Prob. 10P
Ch. 11.A - Prob. 11PCh. 11.A - Prob. 12PCh. 11 - Prob. 1.1PCh. 11 - Prob. 1.2PCh. 11 - Prob. 1.3PCh. 11 - Prob. 2.1PCh. 11 - Prob. 2.2PCh. 11 - Prob. 2.3PCh. 11 - Prob. 2.4PCh. 11 - Prob. 2.5PCh. 11 - Prob. 2.7PCh. 11 - Prob. 2.8PCh. 11 - Prob. 2.9PCh. 11 - Prob. 3.1PCh. 11 - Prob. 3.2PCh. 11 - Prob. 3.3PCh. 11 - Prob. 3.4PCh. 11 - Prob. 3.5PCh. 11 - Prob. 3.6P
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- Suppose that the city of New York issues bonds to raise money to pay for a new tunnel linking New Jersey and Manhattan. An investor named Susan buys one of the bonds on the same day that the city of New York pays a contractor for completing the first stage of construction. Is Susan making an economic or a financial investment? What about the city of New York?arrow_forwardExplain what is meant by the term “investing?” How does investing differ from saving and trading?arrow_forwardWhich of the following situations represent investment or saving? Explain. Your family takes out a mortgage and buys a new house. You use your $200 paycheck to buy stock in AT&T. Your roommate earns $100 and deposits it in his account at a bank. You borrow $1,000 from a bank to buy a car to use in your pizza delivery business.  For each of the following pairs, which bond would you expect to pay a higher interest rate? Explain. A bond that repays the principal in year 2030 or a bond that repays the principal in year 2040.   2 . A bond from Coca-Cola or a bond from a software company you run in your garage.arrow_forward
- Taking out a mortgage to buy a condo, buying a mutual fund, and building a new factory are all examples of investment. True or False?arrow_forward1. Why it is not ideal to invest according to what the board lot is telling you?2. What should be the minimum capital investment to maximize your investment? Why?arrow_forwardImagine that a local water company issued $10,000 ten-year bond at an interest rate of 6%. You are thinking about buying this bond one year before the end of the ten years, but interest rates are now 9%. a. Given the change in interest rates, would you expect to pay more or less than $10,000 for the bond? b. Calculate what you would actually be willing to pay for this bond.arrow_forward
- Discuss the overall purpose people have for investing. Define investmentarrow_forward#1 Why should a financial investor care about diversification? #2 Is investing in housing always a very safe investment?arrow_forwardA friend asks you to explain the difference between saving and investment. Explain the difference.arrow_forward
- Three students have each saved $1,000. Each has an investment opportunity in which he or she can invest up to $2,000.Here are the rates of return on the students' investment projects: Harry 5 percent Ron 8 percent Hermione 20 percent  a. If borrowing and lending are prohibited, each student uses only personal savings to finance his or her own investment project, how much will each student have a year later when the project pays its return? b. Now suppose their school opens up a market for loanable funds in which students can borrow and lend among themselves at an interest rate r. What would determine whether a student would choose to be a borrower or lender in this market? c. Among these three students, what would be the number of loanable funds supplied and quantity demanded at an interest rate of 7 percent? At 10 percent? d.At what interest rate would the loanable funds market among these three students be in equilibrium? At this interest rate,…arrow_forwardSuppose you received a US savings bond as a gift, and the bond pays $100 at maturity, which is ten years from now. What happens to the present value of this bond payment if the interest rate increases?  A. Present value increases  B. Present value is not affected  C. Present value declinesarrow_forwardConsider that you were given a US savings bond that will pay $100 when it matures in ten years. What happens if the interest rate rises to the present value of this bond payment?Why happens if the interest rate rises to the present value of this bond payment? A. Increases in present value B. The current value is unaffected. C. A decrease in present valuearrow_forward
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