Suppose Frank is considering purchasing an asset that will have a future value of $1000 in 7 years. The interest rate is 6% and the price of the asset is $600. Should Frank buy the asset? Why or why not?
What will be an ideal response?
The present value of the asset according to the future value and current interest rate is $665.06 = $1000/(1.06)7. Frank should definitely buy the asset as its price is lower than its present value, making it a value.
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Dave, a U.S. citizen buys a bicycle manufactured in China. Dave's purchase is
a. both a U.S. and Chinese export. b. both a U.S. and Chinese import. c. a U.S. import and a Chinese export. d. a U.S. export and a Chinese import.
According to the text, which of the following is a determinant of macroeconomic performance?
A. Prices B. Policy levers C. The unemployment rate D. The international value of the dollar
The difference between standard deviation and value at risk is:
A. standard deviation reflects the spread of possible outcomes where value at risk focuses on the value of the worst outcome. B. value at risk is expected value times the standard deviation. C. value at risk is a more common measure in financial circles than is standard deviation. D. nothing, they are two names for the same thing.
When analyzing a problem, if an economist is attempting to understand whether or not an action was fair or just, the economist is thinking
A. negatively. B. positively. C. normatively. D. justifiably.