Suppose you invest $10,000 at 7% interest to be withdrawn by your heirs in 100 years. According to the rule of 70, approximately how much will your heirs be able to withdraw?
With a 7% interest rate the rule of 70 implies the investment will double every 10 years. The investment will therefore double 10 times over 100 years. At the end of 100 years the investment will be worth approximately 210 x $10,000 = $10,240,000.
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Which of the following describes the relationship between bond prices and bond yields?
a. There is a positive relationship between the yield and the price. b. Every 1% increase in the bond price results in a 2% increase in the yield. c. When the bond price is greater than the annual interest, yield is greater than one. d. Bond price divided by the bid price is equal to the yield. e. There is an inverse relationship between the yield and the price.
A 10 percent increase in the price of butter reduces butter consumption by about 5 percent. The increase causes households to
a. spend more on butter. b. spend less on butter. c. spend the same amount on butter. d. consume more goods like bread that are complements of butter.
The sum of all factor payments in the economy yields
A. gross domestic product. B. national income. C. disposable income. D. net domestic product.
Precontractual informational asymmetries that generate contracting costs can lead to
A. bargaining failures and adverse selection. B. perquisite taking and differential risk exposure. C. implicit contracts and reputational concerns. D. explicit contracts and credibility issues.