Answer
The answer and procedures of the exercise are attached in a microsoft excel document.
Explanation
Please consider the data provided by the exercise. If you have any question please write me back. All the exercises are solved in a single sheet with the formulas indications.
Answer:
The correct option is : C. Government spending increases interest rates and decreases private investment.
Explanation:
The term crowding out refers to a situation of increased interest rates and a decrease in private investment. The government spending is known as the crowding out investments, as it demands more loanable funds and thus leading to increase in the interest rates and a reduction in the private investment spending.
Would say that choices 1 and 2 would be the best answers!
Answer:
$9.40
Explanation:
First we have to calculate the future value of the stock when it starts to pay the $1.40 using the perpetuity formula:
stock price in 7 years = $1.40 / 10.7% = $13.08
Now we have to find the present value of both next year's dividend and the perpetuity:
stock price = ($3.30 / 1.107) + ($13.08 / 1.107⁷) = $2.98 + $6.42 = $9.40
