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Unformatted text preview: Economics 201: Principles of Macroeconomics Amjad Toukan Spring 2008 Due at the start of lecture on February 27/28 PROBLEM SET 5 Answers 1 Textbook Exercises (1) Chapter 27, Problems 1, 2, 3, 4, 5, 6, 7 1. The future value of $24 invested for 400 years at an interest rate of 7% is . 6 . 13 $ 000 , 000 , 000 , 600 , 13 $ 24 $ ) 07 . 1 ( 400 trillion x = = 2. a. The present value of $15 million to be received in four years at an interest rate of 11% is . 88 . 9 $ ) 11 . 1 ( 15 $ 4 million million = Because the present value of the payoff is less than the cost, the project should not be undertaken. The present value of $15 million to be received in four years at an interest rate of 10% is . 25 . 10 $ ) 1 . 1 ( 15 $ 4 million million = Because the present value of the payoff is greater than the cost, the project should be undertaken. The present value of $15 million to be received in four years at an interest rate of 9% is . 63 . 10 $ ) 09 . 1 ( 15 $ 4 million million = Because the present value of the payoff is greater than the...
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 Spring '08
 Toukan
 Macroeconomics

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