Answer:
a. Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money.
b. Investment projects that are financed by savers have larger rates of return than projects that do not receive financing.
Explanation:
Loanable funds refer to the aggregate amount of money that all sectors, entities and individuals within an economy have decided to keep as an investment, instead of spending on personal consumption, by saving and giving them out as loans to borrowers.
The market for loanable funds is in equilibrium when the supply of loanable funds by the saver is equal to demand for loanable funds by the borrowers at a given interest rate.
When the market for loanable funds is in equilibrium, efficiency is maximized because projects that have higher rates of return are given priority to be funded first before the projects with lower rates of return are funded. The reason is that savers that have lowest costs of lending provides funds for the projects that have highest return rates in equilibrium. However, potential saver who do not lend money will prefer a higher interest rates.
Therefore, the correct options related to the two aspects of efficiency that the equilibrium of market for loanable funds exhibits are as follows:
a. Savers who lend money are willing to accept a lower minimum interest rate than potential savers who do not lend money.
b. Investment projects that are financed by savers have larger rates of return than projects that do not receive financing.
Answer:
E. $7,190
Explanation:
Net present value is the present value of after tax cash flows from an investment less the amount invested.
NPV can be calculated using a financial calculator
For project A,
Cash flow in year 0 = $-14,500
Cash flow in year 1 = $9,500
Cash flow in year 2 = $9,500
Cash flow in year 3 = $9,500
I = 15%
NPV = $7190.64
To find the NPV using a financial calacutor:
1. Input the cash flow values by pressing the CF button. After inputting the value, press enter and the arrow facing a downward direction.
2. After inputting all the cash flows, press the NPV button, input the value for I, press enter and the arrow facing a downward direction.
3. Press compute
I hope my answer helps you
Given that Lucky won $1000000 and has an option of receiving $50000 p.a for 30 years, the total amount received after 30 years in case he goes for option 2 will be:
amount=(yearly payment)+(number of years)
=(50000)×(30)
=$1,500,000
This implies that the second option is best choice. Given the information, we shall conclude that the best thing to do is to calculate the present value of the annuity payments.
The answer is D]
To solve:
If we assume there are 30 days in the month then the policy was held by the original owner from November 1st – May 15th which is 195 days. Assuming there are 30 days in the month there are 360 days in the year and that is equal to 1,080 for the insurance policy. If we divide the price of the policy, $1,164 by the amount of days the policy will be held for 1,080 then the policy is worth $1.08 a day. Next, take the amount of days the original owner held the policy and multiply it by the amount per day the policy costs (195)($1.08) = $210.60 Then, we need to subtract $210.60 from the full cost of the policy ($1,164 - $210.60) = $953.40 The buyer should pay the seller $953.40 at closing.
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