Principles of Economics 2e
2nd Edition
ISBN: 9781947172364
Author: Steven A. Greenlaw; David Shapiro
Publisher: OpenStax
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Textbook Question
Chapter 17, Problem 40P
Many retirement funds charge an administrative fee each year equal to 0.25% on managed assets. Suppose that Alexx and Spenser each invest
After 30 years, how much more will Alexx have than Spenser?
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5. Suppose Alex and Spenser each invest $5,000 in the same stock. Alex invests directly and earns 5% a year. Spenser uses a retirement fund, which charges an administrative fee equal to 0.25% on managed assets, and earns 4.75%.a) At the end of one year, how much will Alex and Spenser have?b) If Alex and Spenser leave their investments in place for 30 years, with annual compounding ofthe interest, how much more will Alex have than Spenser at the end of the 30-year period?
What is the value of a preferred stock that pays a perpetual dividend of $145 at the end of each year when the interest rate is 7 percent?
Your bank account pays an interest rate of 8 percent. You are considering buying a share of stock in XYZ Corporation for $110. After 1, 2, and 3 years, it will pay adividend of $5. You expect to sell the stock after 3 years for $120. Is XYZ a good investment? Support your answer with calculations.
Chapter 17 Solutions
Principles of Economics 2e
Ch. 17 - Answer these three questions about early-stage...Ch. 17 - From a firms point of view, how is a bond similar...Ch. 17 - Calculate the equity each of these people has in...Ch. 17 - Which has a higher average return over time:...Ch. 17 - Investors sometimes fear that a high-risk...Ch. 17 - What is the total amount of interest from a 5,000...Ch. 17 - If you receive 500 in simple interest on a loan...Ch. 17 - You open a 5-year CD for 1,000 that pays 2...Ch. 17 - What are the- most common ways for start-up firms...Ch. 17 - Why can firms not just use their own profits for...
Ch. 17 - Why are banks more willing to lend to...Ch. 17 - What is a bond?Ch. 17 - What does a share of stock represent?Ch. 17 - When do firms receive money from a stock sale in...Ch. 17 - What is a dividend?Ch. 17 - What is a capital gain?Ch. 17 - What is the difference between a private company...Ch. 17 - How do the shareholders who own a company choose...Ch. 17 - Why are banks called financial intermediaries?Ch. 17 - Name several different kinds of bank account. How...Ch. 17 - Why are bonds somewhat risky to buy, even though...Ch. 17 - Why should a financial investor care about...Ch. 17 - What is a mutual fund?Ch. 17 - What is an index fund?Ch. 17 - How is buying a house to live in a type of...Ch. 17 - Why is it hand to forecast future movements in...Ch. 17 - What are the two key choices U.S. citizens need to...Ch. 17 - Is investing in housing always a very safe...Ch. 17 - If you owned a small firm that had become somewhat...Ch. 17 - Explain how a company can fail when the safeguards...Ch. 17 - What are some reasons why the investment strategy...Ch. 17 - Explain why a financial investor in stocks cannot...Ch. 17 - Explain what happens in an economy when the...Ch. 17 - You and your friend have opened an account on...Ch. 17 - How do bank failures cause the economy to go into...Ch. 17 - The Darkroom Windowshade Company has 100,000...Ch. 17 - Imagine that a local water company issued 10,000...Ch. 17 - Suppose Ford Motor Company issues a five year bond...Ch. 17 - How much money do you have to put into a bank...Ch. 17 - Many retirement funds charge an administrative fee...
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- What is an index fund?arrow_forwardExplain how shares of stocks differ from mutual funds.arrow_forwardSuppose Ford Motor Company issues bonds with a face value of $500 and an annual coupon payment of $20 What is the interest rate Ford is paying on the borrowed funds? The interest rate is percentarrow_forward
- Discuss the rationale for expecting an efficient capital market. What factor would you look for to differentiate the market efficiency for two alternative stocks?arrow_forwardwhat equation can determine whether a stock or asset is overvalued significantly?arrow_forwardFind out change in stock if closing stock is $60,000 and opening stock is $34,000?arrow_forward
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- 11. Case study a. Let's say your friend offer simple investment. You are planning to buy an asset for RM 3350. This investment is very safe. You would sell off the asset in three years for RM 400. You know you could invest RM 335 elsewhere at 10 percent with very little risk. What do you think of the proposed investment?arrow_forwardWhich has a higher average return over time: stocks, bonds, or a savings account? Explain your answer.arrow_forwardConsider a stock whose value increases across an 8-year period as shown in the table. Instructions: Round your answers to two decimal places. a. Calculate the percentage change in the value of the stock from year to year. Year Stock Value 1 $110.00 2 120.00 3 130.00 4 145.00 5 160.00 6 260.00 7 420.00 8 690.00 Percent Change % % % % % b. Calculate the percentage change in the value of the stock across the entire 8-year period. % c. Do you think this qualifies as a bubble? O No, because the percentage change in the stock value fluctuates up and down across the 8 years. O No, because the percentage change in the stock value has not increased. Yes, because the percentage change in the stock value is positive every year. ○ Yes, because the percentage change in the stock value has increased greatly.arrow_forward
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