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2 years ago

2. Suppose you borrow $2,000 at 5% and you are going to make annual payments of $734.42. How long before you pay off the loan

Business

1 answer:

Alona [7]2 years ago

6 0

Answer:

3 years

Explanation:

The computation of the time period is shown below

Present value of annuity = Annuity × [1 - (1 + interest rate)^-time period] ÷ rate

$2,000 = $734.42 × [1 - (1.05)^-n] ÷ 0.05

$2,000 = $14,688.4 × [1-(1.05)^-n]

1-(1.05)^-n = ($2000 ÷ $14,688.4)

(1.05)^-n = 1 - ($2000 ÷ $14,688.4)

( 1 ÷ 1.05)^n = 0.86383813

Now take the log to the both sides

n × log(1 ÷ 1.05) = log0.86383813

n = log0.86383813 ÷ log (1 ÷ 1.05)

= 3 years

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3 years ago

What is the percentage change in the PV of $100 due in 1 year when the interest rate changes from 5% to 10%?

son4ous [18]

Answer:

c. Decreases by 4.5%

Explanation:

Calculation for What is the percentage change in the PV

First step is to calculate the present value when r is 5%

PV = 100 / (1 + 5%)^1

PV = $95.24

Second step is to calculate present value when r is 10%

PV = 100 / (1 + 10%)^1

PV = $ 90.91

Last step is to calculate the percentage change in the PV

Percentage change in the PV = (90.91 - 95.24) * 100 / 95.24

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Therefore the Percentage change in the PV Decreases by 4.5%

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2 years ago

In the budget constraint framework, when the price of a good rises and demand for the other good decreases, what can you say abo

nignag [31]

Answer:

The increase in demand of the product with the higher price or decrease in demand for the other goods is because the substitution effect is outweighed by the income effect of price increase.

Explanation:

The above explanation in economics refers to Giffen Good. The idea behind this concept Giffen is that if you do not have money and there is an increase in the price of a fundamental product such as bread, it is still impossible to afford other alternatives, hence you will go ahead to buy bread or avoid buying any of the product. Hence, the demand for other product will also decrease in this case. This means that the demand for product with higher price or decrease in other substitute product is due to the fact that the income effect outweighs the substitution effect. Hence people do not have the money to even afford the alternative product.

8 0

2 years ago

Candy is trying to decide between two job offers. The compensation package for job A includes a $300-per-month health insurance

miskamm [114]

Answer:

Part 1. Monthly health insurance benefit for job A is $205

Yearly health insurance benefit for job A is $2,460

Monthly health insurance benefit for job B is $295

Yearly health insurance benefit for job B is $3,540

Part 2. The yearly value of the life insurance policy for job A is $480

The yearly value of the life insurance policy for job B is $600

Part 3. The yearly value of the 401 (k) match from job A is $3, 250

The yearly value of the 401 (k) match from job B is $5, 760

Explanation:

Part 1. The health insurance benefit per month for job A = $300 - $95 = $205

The annual health insurance benefit = $205×12 = $2,460

The health insurance benefit per month for job B = $400 - $105 = $295

The annual health insurance benefit = $295×12 = $3,540

Part 2. The monthly life insurance plan for job A = $40

The yearly value of the life insurance policy for job A = $40 × 12 = $480

The monthly life insurance plan for job B = $50

The yearly value of the life insurance policy for job B = $50 × 12 = $600

Part 3. The yearly value of the 401 (k) match from job A = 0.05 × $65,000 = $3, 250

The yearly value of the 401 (k) match from job B = 0.09 × $65,000 = $5, 760

4 0

2 years ago

Zinc, Inc. has 10,000 shares of $5 par, 5% preferred stock, and 5,000 shares of $10 par common stock issued and outstanding. If

Anna11 [10]

Answer:

A. 2500

Explanation:

10,000 shares x $5 x .05= 2500

8 0

3 years ago