Mr. Pierpont has wealth of $200,000. He wants to keep at least $80,000 in bonds at all times, and will shift $10,000 into bonds from his checking account for each percentage point that the interest rate on bonds exceeds the interest rate on his
checking account. If the interest rate on checking accounts is 4% and the interest rate on bonds is 9%, how much does Mr. Pierpont keep in his checking account? A) $50,000
B) $70,000
C) $130,000
D) $150,000
B
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According to the theory of the invisible hand, if buyers and sellers are free to pursue their own self-interest, the result often will be:
A. an equitable allocation of resources. B. an incomplete allocation of resources. C. an efficient allocation of resources. D. the exploitation of productive resources.
If the government implements a tax on the general public to pay for street lighting in one neighborhood,
A) the tax redistributes well-being and the benevolent social planner is not pleased. B) the tax redistributes well-being, but the benevolent social planner is pleased. C) the tax reduces well being and the benevolent social planner is not pleased. D) the tax has no bearing on well-being and the benevolent social planner is indifferent.
The value of a loan of $2,000 after a year at 2 percent interest is:
A. $2,040. B. $4,000. C. $2,400. D. $2,020.
In the long run, diminishing returns would:
A. not exist because no input is held constant. B. not exist because all inputs are held constant. C. still exist at a lesser degree because inputs are allowed to vary. D. exist at a greater degree, because all inputs are allowed to vary.