EBK ESSENTIALS OF ECONOMICS
8th Edition
ISBN: 8220103599832
Author: Mankiw
Publisher: Cengage Learning US
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Question
Chapter 19, Problem 3CQQ
To determine
Calculation of the present value of money.
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Students have asked these similar questions
Which of the following has the highest future value?
A.
$100 saved for 2 years at 10 percent interest
B.
$130 saved for 2 years at 7 percent interest
C.
$120 saved for 2 years at 8 percent interest
D.
$110 saved for 2 years at 9 percent interest
To pay off your student loan, you must pay $10,000 at the end of the year for the next three years. The interest rate is 5 percent a year. What is the present value of these payments?
A.
$30,000.00
B.
$27,232.48
C.
$8,638.28
D.
$29,100.00
In five years, you want to be able to buy a new car for $30,000. If the interest rate is 3 percent a year, what is the present value of this sum?
A.
$30,000.00
B.
$25,500.00
C.
$25,878.26
D.
$34,778.22
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Similar questions
- You open a 5-year CD for 1,000 that pays 2 interest, compounded annually. What is the value of that CD at the end of the five years?arrow_forwardHector puts $150 into an account when the interest rate is 4 percent. Later he checks his balance and finds he has about $168.73. How long did Hector wait to check his balance? A. 3 years B. 3.5 years C. 4 years D. 4.5 yearsarrow_forward6. Alex invested a certain amount to a business and promised to pay him back with 1.8 times his original investment. They agreed to have it compounded monthly within 9 years. What is the nominal rate of interest r in percent?arrow_forward
- What is the present value of $100 paid two years from now when the interest rate is 10 percent? A. $100 B. $90.91 C. $82.64 D. $75.13arrow_forwardAkhisha wanted to buy a cell phone which will have a price of P13,000 for 90 days from now due to the increase in prices of 12 percent simple interest. What is the present worth of a cell phone? a. P15,621 b. P12,621 c. P13,621 d. P14,621arrow_forwardWhen Andrew was 10 years old, his mother invested $50,000 to use for his college education seven years later. After seven years, how much money did Andrew have if the interest rate was 2 percent a year? A. $57,434.28 B. $50,357.00 C. $50,000.00 D. $43,528.01arrow_forward
- Compounding refers to: Select one: a. the increased value of an investment that arises from the payment of periodic interest. b. the process of earning interest on both the interest and the principal of an investment. c. the paying back of both interest and principal during the life of a fixed-payment loan. d. the calculation of interest rates after the compounding effect of taxes has been allowed for.arrow_forward11. The face value of a bond is $10,000, and the annual coupon payment is $850. What is the coupon rate?arrow_forward6. A) If a company will pay $100,000 for a truck that will increase deliveries to be made, giving an additional $15,000 in revenue each year for 10 years, should the company buy it? Interest rates are 5%. Show your math. B) Now revenue is estimated to be only $12,000 a year for 10 years. Same interest rate, should the truck be purchased? C) Explain where interest rates come from, using details.arrow_forward
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