Exam 13: Trade-Offs Involving Time and Risk and Open Economy Macroeconomics

Tom has two investment options. He can either invest $3,000 in a friendʹs project or he can deposit the same amount in a bank that offers him an annual rate of interest of 6 percent. If he invests in his friendʹs project, he will receive $3,400 after 5 years. -Refer to the scenario above. What will be the balance in Tom's account after 5 years if he deposits $3,000 in the bank?

An investment of $20,000 offers a return of $15,000 in 10 years and another return of $15,000 after 15 years. The market rate of interest is 6 percent per year. -Refer to the scenario above. What is the sum of the present values of the returns from this investment?

Suppose India borrows $10,000 from the United States at the beginning of 2016. The flexible exchange rate is 50 Indian rupees per dollar. -Refer to the scenario above. The amount of the loan in rupees is ________.

Wendy and John each deposit $2,000 in a bank account at different rates of interest. Wendy receives interest on her deposit at an annual rate of 6 percent, while John receives interest at an annual rate of 9 percent. -Refer to the scenario above. What will be the future value of John's deposit after 3 years?

Consider the following two options. You can either invest $30,000 in a bank that offers you an interest rate of 6 percent compounded annually for 30 years, or you can lend $30,000 to your friend for 30 years at an interest rate of 10 percent compounded annually. -Refer to the scenario above. If you lend $30,000 to your friend for 30 years, you will receive ________When she repays the amount after 30 years.

Wendy and John each deposit $2,000 in a bank account at different rates of interest. Wendy receives interest on her deposit at an annual rate of 6 percent, while John receives interest at an annual rate of 9 percent. -Refer to the scenario above. What will be the future value of Wendy's deposit after 3 years?

An investor is considering three different investment options. Investing in Option A pays him $4,000 after 6 years, investing in Option B pays him $7,600 after 7 years, and investing in Option C pays him $9,000 after 8 years. If he deposits the amount with a bank, he would receive an annual interest rate of 9 percent. -Refer to the scenario above. If the investor plans to invest a sum of $4,000, the net present value of Option A is ________.

Trinity deposits $8,000 in a bank at an interest rate of 8 percent per year compounded annually. -Refer to the scenario above. What will be the future value of the deposit after 3 years?