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%
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
Why are banks more willing to lend to well-
established firms?
Imagine that a local water company issued \(10,000
ten-year bond at an interest rate of 6%. You are thinking about buying this bond one year before the end of the ten years, but interest rates are now 9%.
a. Given the change in interest rates, would you
expect to pay more or less than \)10,000 for the
bond?
b. Calculate what you would actually be willing to
pay for this bond.
Why can firms not just use their own profits for
financial capital, with no need for outside investors?
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.
How much money do you have to put into a bank
account that pays 10% interest compounded annually to have $10,000 in ten years?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
