LSC CUMBERLAND EC202 MICRO>PKG<
21st Edition
ISBN: 9781260586992
Author: McConnell
Publisher: MCG
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Question
Chapter 18, Problem 6DQ
To determine
Time value of money (present value and future value).
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QUESTION 19
You lend your sister's daughter $2,000 for a year, if at the end of the year she pays you $2,180. The interest rate you are charging her is
O 1.1%.
O 9%.
O 10%.
O 20%.
You have $40,000 of current income and $60,000 of future income. The interest rate between the current and
future period is 5 percent. What is the maximum amount you could consume in the future?
O $100,000
O $107,000
O $102,000
O $110,000
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?
Chapter 18 Solutions
LSC CUMBERLAND EC202 MICRO>PKG<
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