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mixer [17]
3 years ago
7

You are comparing three investments, all of which pay $100 a month and have an interest rate of 8 percent. One is ordinary annui

ty, one is an annuity due, and the third investment is a perpetuity. Which one of the following statements is correct given these three investment options?A) To be the perpetuity, the payments must occur on the first day of each monthly periodB) The ordinary annuity would be more valuable than the annuity due if both had a life of 10 yearsC) The present value of the perpetuity has to be higher than the present value of either the ordinary annuity or the annuity dueD) The future value of all three investments must be equalE) The present value of all three investments must be equal
Business
1 answer:
Ivan3 years ago
6 0

Answer:

c. The present value of the perpetuity has to be higher than the present value of either the ordinary annuity or the annuity due

Explanation:

Considering the following statements:

  • the ordinary perpetuity, the payments must occur on the first day of each monthly period. Hence this statement is incorrect.
  • The ordinary annuity would be more valuable than the annuity due if both had a life of 10 years. Incorrect.
  • In case of perpetuity the times is not limited, hence would get the higher return.
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How much profit is this monopolist earning? You may use this formula when solving the question: Profit = Total Revenue − Total C
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Explanation:

The Profit as the question shows is the Total Revenue less the total cost.

Total Revenue.

This will be the amount of goods sold multiplied by the price they are sold at.

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The price they sell at is the intersection of this quantity with the demand curve which is at $120.

Total Revenue = Units Sold * Price

= 4 * 120

= $480

Total Cost

The total cost will be the average cost per unit multiplied by the number of units sold. The relevant average cost is the cost associated with the maximised out of 4 units which according to the graph is $40.

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3 years ago
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