June has a small house, on a small street, in a small town. If shesells the house now, she will likely get $110, 000 for it. If shewaits one year, she will probably receive more- say, $120,000. Ifshe sells the house now, she can invest the money in a 1-yearguaranteed growth bond that pays 8% annual interest,compounded monthly. What are the 2 options worth, and whichshould she choose?

From given information, if house is sold now, she will get $110,000 and invest in 1-year bond with…

Answered: June has a small house, on a small…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter19: The Basic Tools Of Finance

Section: Chapter Questions

Problem 1CQQ

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Similar questions

Suppose you deposited $200 at the end of every year for seven years in an account that earned 6% annual effevtive interest. At the end of seven years, how much would the account be worth?
How much money will you have in seven yearsif you deposit $7,000 in the bank at 8.5% interestcompounded daily?
Suppose you are considering working at a local coffee shop 5nights a week. You expect to save $125 a month from the jobafter meeting all your expenses. To be eligible for the job youmust undergo a week’s work training at the coffee shop.Assume the training costs you $100.Suppose you plan to workthe next 9 months there and you can borrow and lend moneyat an annual rate of 6% compounded monthly.What is the net present value of this work to you?
a. What is the effective annual interest rate if the nominal annual interest rate is 10%, compounded quarterly? b. What is the effective annual interest rate if the nominal annual interest rate is 10%, compounded monthly? c. What is the effective annual interest rate if the nominal annual interest rate is 10%, compounded daily? d. What is the effective annual interest rate if the nominal annual interest rate is 10%, compounded continuously? e. At what compounding period does the effective annual interest rate very closely approximate continuous compounding? (Consider to the nearest 0.0001)
Let's say that you invest $8000 at 3.1 percent annual interest for 6 years. What will its value be? Carefully follow all numeric directions. Round intermediate steps to four decimal places and final answers to two.
6. If you invest P3,500 in savings account that pays 4% simple interest, how much interest will you earn after 2 years and 5 months?
1- How much can you afford to spend now on an Alarm Fire system if it will save you $21,300 per year for the next 5 years? Use an interest rate of 10% per year. 2. You need to buy a car in two years from now, the car dealer made you an offering, if you buy the car now, he would give you 40% a discount rate. You know that the car price will be SR 142,000 if you delay the purchasing decision two years. what is the present worth of the savings? if you refuse the offering. Assume the interest rate is 10% per year. 3. The amount of money that Energy Company can spend now for improving productivity instead of spending $30,000 three years from now at an interest rate of 12% per year is closest to: (a) $15,700 (b) $17,800 (c) $19,300 (d) $21,350
c. You want $1,000,000 in the bank when you retire in 35 years. How much should you deposit each year? Assume an interest rate of 10%. What is the annual payment if you defer retire to 40 years?
John plans to invest an equal amount of $2.000 in equity fund every year-end beginning with this year. The expected annual rate of return is 15%. She plans to invest for 20 years. The expected annual rate of return is 15%. She plans to invest in 20 years. How much could she expect to have at the end of 20 years?
9. In how many years will $1,500 yield an interest of 5200 at 2% simple interest?
1. How much must you deposit each year to have $20,000 at the end of 15 years with money worth 7%?

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