Economics Answers

Discussion Questions: According to an article by CNBC, a new survey finds the median American household has $2,729 in a savings account in 2019 and 34% of Americans have nothing saved. What does this say about Americans' financial management? How does the lack of saving impact other Americans?

Prompt: I find this issue to have two sides to it: This represents not only people that let their money slip away from them and spend it all, but also people that do not have the financial ability to save. Some people that are living paycheck to paycheck do not have any spare money to put into a savings account. With bills, rent, groceries, and any dependent/family costs to deal with, some families are not financially able to put any money into a savings account.

Instructions: According to the discussion questions, include in your response whether or not you agree or not and the reason(s) why in regards to the prompt.

Discussion Questions: According to an article by CNBC, a new survey finds the median American household has $2,729 in a savings account in 2019 and 34% of Americans have nothing saved. What does this say about Americans' financial management? How does the lack of saving impact other Americans?

Prompt: I personally think that majority of Americans today just simply cannot afford to put money into saving accounts and that they need to money earned to keep them afloat. Especially in this time of inflation and job loss, poverty and the divide between the haves and the have nots is quite harsh. And the lack of savings for each American individual could mean very bad news and they can easily go into debt from a large purchase or finical risk.

Instructions: According to the discussion questions, include in your response whether or not you agree or not and the reason(s) why in regards to the prompt.

Discussion Questions: According to an article by CNBC, a new survey finds the median American household has $2,729 in a savings account in 2019 and 34% of Americans have nothing saved. What does this say about Americans' financial management? How does the lack of saving impact other Americans?

Prompt: This says that some Americans either can't or won't save money. Those who can either don't put a lot into savings or don't make a lot of money to put into savings. The lack of savings in people's accounts can lead to debts that come from sudden purchases or debts from planned purchases that the person either doesn't have enough money and is forced to have a small amount of debt, or the person who doesn't save and gains tons of debt.

Instructions: According to the discussion questions, include in your response whether or not you agree or not and the reason(s) why in regards to the prompt.

An increase in supply tends to increase the equilibrium price and quantity?

Consider two bonds, HI and LI. The HI bond has a 10% coupon rate and the

LI bond has a 5% coupon rate. Both bonds pay interest annually and are priced to yield

10%. Suppose the following interest scenarios are possible at the point in time when both

bonds have five years remaining to maturity:

possible interest rate possibility of interest rate

5% 10%

10 50

15 40

Required:

a. Calculate the expected value for each bond.

b. Calculate the standard deviation of possible values for each bond.

c. Which bond is riskier? Why?

Answer the following problems

1. Consider a given bond that has five years maturity, Br.1000 face value and a 12 percent coupon rate. Suppose a broker’s commission of Br.50 is imposed by brokers to buy or sell the bond. Assume further, that the discount rate (minimum

required rate of return) is 10 percent and the bond pays interest annually. What is

the price of the bond?

2. Project X requires an immediate investment of $150,000 and will generate net

cash inflows of $60,000 for the next three years. The project’s discount rate is 7%.

If net present value is used to appraise the project, should Project X be

undertaken?

You are evaluating an investment project, Project YY, with the following Cash

flows

period cash flow

0 -$ 100,000

1 43,798

2 43,798

3 43,798

Required: Calculate the following:

a. Payback period

b. Discounted payback period, assuming a 10% cost of capital

c. Discounted payback period, assuming a 14% cost of capital

d. Net present value, assuming a 14% cost of capital

Answer the following problems

A stock is trading at $80 per share. The stock is expected to have a year-end dividend of $4 per share (D1 $4), which is expected to grow at some constant rate g throughout time. The stock’s required rate of return is 14%. If you are an analyst who believes in efficient markets, what is your forecast of g?

Answer the following problems

a. If you deposit $10,000 in a bank account that pays 10% interest annually, how much will be in your account after 5 years?

b. What is the present value of a security that will pay $5,000 in 20 years if securities of equal risk pay 7% annually?

c. Your parents will retire in 18 years. They currently have $250,000, and they think they will need $1,000,000 at retirement. What annual interest rate must they earn to reach their goal, assuming they don’t save any additional funds?

d. If you deposit money today in an account that pays 6.5% annual interest, how long will it take to double your money?

Beginning with the Fall 2018 semester, three North Carolina universities (UNC Pembroke, Western Carolina University, and Elizabeth City State University) reduced their tuition. After the Fall semester had begun, each of these universities announced that they had experienced a large increase in enrollment.

a. Explain what these facts tell us about the price elasticity of demand for education at these universities.

b. Use your answer to part a. of this question to explain whether reducing tuition would lead to an increase, a decrease, or no change in the amount of revenue received by the universities.