Suppose you have $2,000 and plan to purchase a 10-year certificate of deposit (CD) that pays 6.5% interest, compounded annually.
1 answer:
Answer:
<em>The future value of the investment will be $3,754</em>
Explanation:
<u>Future Value of Investment</u>
Suppose we have a principal P invested for a period of n years at an interest rate i compounded annually. The final value or future value FV of the investment can be computed by:
The case we are considering consists of a present value P=2,000 that will be used to purchase a n = 10-year certificate of deposit (CD). It pays i=6.5% interest. When the CD matures, 10 years from now its value will be
The future value of the investment will be $3,754
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Question: The demand function for widgets is given by D(P) = 16 − 2P. Compute the change inconsumer surplus when price of a widget increases for $1 to $3. Illustrate your result graphically
Answer:
For price of a widget equal to $1 consumer surplus is
D(1) = 16 - 2(1) = 14
CS₁ = ½ × (8 – 1) × D(1) = ½ × 7 × 14 = 49.
When price is equal to $3 consumer surplus is
D(3) = 16 - 2(3) = 10
CS₃ = ½ × (8 – 3) × D(3) = ½ × 5 × 10 = 25
