Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Chapter 27, Problem 14CQ
To determine
Check whether the person enrolls in the program or not.
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Joanne has just completed high school and is trying to determine whether to go to communtiy college for two years or go directly to work. Her objective is to maximize the savings she will have in the bank five years from now.
If she goes directly to work, she will earn $18,500 per year for each of the next five years. If she goes to community college, for each of the next two years she will earn nothing—indeed, she will have to borrow $6,000 each year to cover tuition and books. This loan must be repaid in full three years after graduation. If she graduates from community college, in each of the subsequent three years, her wages will be $35,000 per year. Joanne’s total living expenses and taxes, excluding tuition and books, equal $15,000 per year.
Joanne should go to (Click to select) work junior college , since the total value of Joanne's savings would be $__ if she goes directly to work and $__ if she goes to community college.
You are a financial planner. One of your clients is 40 years old and wants to begin saving for retirement. You advise her to put $5,000 a year into the stock market. You estimate that the market's effective return will be, on average, 12 percent a year. Assume the investment will be made at the end of the year. What is the value of her savings after 20 years.You are a financial planner. One of your clients is 40 years old and wants to begin saving for retirement. You advise her to put $5,000 a year into the stock market. You estimate that the market's effective return will be, on average, 12 percent a year. Assume the investment will be made at the end of the year. What is the value of her savings after 20 years.
Note:-
Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.
Answer completely.
You will get up vote for sure.
Angela puts $5,000 in a savings account that pays 5 percent per year.
The future value of her money one year from now is $
As the interest rate
(Enter your response as a whole number.)
the future value of Angela's $5,000 savings will increase.
Chapter 27 Solutions
Economics: Private and Public Choice
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- You are offered an investment that will pay you GH¢ 200 in one year, GH¢ 400 the next year, GH¢ 600 the next year and GH¢ 800 at the end of the next year. You can earn 12 percent on very similar investments. What is the most you should pay for this one?arrow_forwardSuppose a person has a total credit card debt of $1,380 that has a 15 % yearly interest rate. This person also has a savings account with $3,000 that pays 3 % interest per year. Despite the net loss, the person keeps both. Calculate how many times the person appreciates the $1 of savings more than $1 of credit card debt if the person relates similarly to both values of percent paid and received. Enter your answer in the box below and round to two decimal places if necessary. Answer 2 Pan E Keypad Keyboard Shortcuts timesarrow_forwardThe net present value of $1,000 received one year from now will increase with the interest rate. exceed $1,000 as long as the interest rate is positive. exceed the net present value of $1,000 to be received two years from now. equal $1,100 if the current interest (discount) rate is 10 percent.arrow_forward
- Suppose a person has a total credit card debt of $1,100 that has a 11 % yearly interest rate. This person also has a savings account with $5,500 that pays 1 % interest per year. Despite the net loss, the person keeps both. Calculate how many times the person appreciates the $1 of savings more than $1 of credit card debt if the person relates similarly to both values of percent paid and received, Enter your answer in the box below and round to two decimal places if necessary. Answer Keypad Keyboard Shortcuts timesarrow_forwardIf the interest rate is 3 percent, the present value of $900 received at the end of four years is: Multiple Choice $792.00. $799.64. $873.79. $927.40.arrow_forwardSaved You and your spouse are in good health and have reasonably secure jobs. Each of you makes about $45,000 annually. You own a home with a $150,000 mortgage, and you owe $11,600 on car loans, $7.200 in personal debt, and $3.250 in credit card loans. You have no other debt. You have no plans to increase the size of your family in the near future. You estimate that funeral expenses will be $8.000. Estimate your total insurance needs using the DINK method. Total insurance need cesarrow_forward
- Suppose Latasha is a sports fan and buys only baseball caps. Latasha deposits $3,000 in a bank account that pays an annual nominal interest rate of 5%. Assume this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a baseball cap is priced at $10.00. Initially, the purchasing power of Latasha's $3,000 deposit is baseball caps. For each of the annual inflation rates given in the following table, first determine the new price of a baseball cap, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Latasha's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest baseball cap. For example, if you find that the deposit will cover 20.7 baseball caps, you would round the purchasing power down to 20 baseball caps under the assumption that Latasha…arrow_forwardYour paycheck for the year is higher this year than last year. Does that mean that your real income has increased.arrow_forwardSuppose Eleanor is a sports fan and buys only baseball caps. Eleanor deposits $3,000 in a bank account that pays an annual nominal interest rate of 15%. Assume this interest rate is fixed—that is, it won't change over time. At the time of her deposit, a baseball cap is priced at $15.00. Initially, the purchasing power of Eleanor's $3,000 deposit is baseball caps.arrow_forward
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