Suppose you are committed to owning a $215,000 ferrari. if you believe your mutual fund can achieve an annual return of 10.8 per
1 answer:
Answer: I must invest <u>$85424.14</u> today in order to buy a Ferrari nine years from now on the day I turn 30.
We have
Price of the Ferrari nine years from now (Future Value - FV) $215000
Expected Rate of return on the mutual fund (r) 10.8%
Time until I turn 30 (n) 9 years
We can calculate the Present Value (PV) or the money to be invested today as
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Increase in value of dollar has made the foreign steel (a major commodity used in production) cheaper for American producers.
This will reduce the cost of production of American Producers and would increase their profit-margin.
This will induce US firms to produce more and therefore there will be increase in short-run aggregate supply.
So, the given scenario will involve short-run aggregate supply curve and would shift the curve to the right.
Kindly check the attached image below to see the required graph -
