EBK INTERMEDIATE MICROECONOMICS AND ITS
EBK INTERMEDIATE MICROECONOMICS AND ITS
12th Edition
ISBN: 9781305176386
Author: Snyder
Publisher: YUZU
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Chapter 14, Problem 6RQ
To determine

To explain: Whether building to be purchased or not.

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Suppose that Tyler wants to buy a house and is thinking of using $20,000 that sits in a retirement account for a down payment on this new home. Using the $20,000 as a down payment will reduce Tyler's income when he retires in 30 years. If Tyler can earn an 8%8% annual return on his money if he leaves it in the retirement account, how much will his consumption in retirement be reduced if he uses this money for a down payment now?
Phineas and Ferb agree to split the rent for their new apartment. Instead of each paying half each month, they will alternate who pays the total rent each month. Phineas will start next month and make the payments for months 1, 3, 5,.... Ferb will make the rent payments for months 2, 4, .... Assuming a positive interest rate, is this a fair agreement? If yes, briefly explain why. If no, determine who is in the better position and briefly explain why.
Suppose that the interest rate at which Joanne can borrow and lend is 10 percent per year, but she can earn $22,000 with a high school degree. Her tuition and books at college cost $6,000 and her living expenses are $15,000 per year. Savings are deposited at the end of the year they are earned and receive (compound) interest at the end of each subsequent year. Similarly, the loans are taken out at the end of the year in which they are needed, and interest does not accrue until the end of the subsequent year. Now that the interest rate has risen, should Joanne go to college or go to work?
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