Chapter 17: Q 7. (page 425)
If you receive \(500 in simple interest on a loan that you made for \)10,000 for five years, what was the interest rate you charged?
25%
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What are the most common ways for start-up firms
to raise financial capital?
Explain what happens in an economy when the
financial markets limit access to capital. How does this affect economic growth and employment?
You open a 5-year CD for $1,000 that pays 2% interest, compounded annually. What is the value of that CD at the end of the five years?
You and your friend have opened an account on
E-Trade and have each decided to select five similar companies in which to invest. You are diligent in monitoring your selections, tracking prices, current events, and actions the company has taken. Your friend chooses his companies randomly, pays no attention to the financial news, and spends his leisure time focused on everything besides his investments. Explain what might be the performance for each of your portfolios at
the end of the year.
Why can firms not just use their own profits for
financial capital, with no need for outside investors?
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