Authors libby rittenberg 733

5. You have just purchased a new home. No money was required
as a down payment; you will be making payments of $2,000
per month (think of these as annual payments of $24,000) for
the next 30 years. Determine the present value of your future
payments at each of the following interest rates:
1. 2%
2. 4%
3. 6%
4. 8%
6. You own several barrels of wine; over the years, the value of this wine
has risen at an average rate of 10% per year. It is expected to continue
to rise in value, but at a slower and slower rate. Assuming your goal is
to maximize your revenue from the wine, at what point will you sell
it?
7. You have been given a coin collection. You have no personal interest
in coins; your only interest is to make money from it. You estimate
that the current value of the collection is $10,000. You are told the
coins are likely to rise in value over time by 5% per year. What should
you do with the collection? On what factors does your answer
depend?
8. The Case in Point on the increasing scarcity of oil suggested that the
Khurais complex is expected to add 1.2 million barrels to world oil
production by 2009. Suppose that world production that year what
otherwise be 87 million barrels per day. Assume that the price
elasticity of demand for oil is −0.5. By how much would you expect the
addition of oil from the Khurais complex to reduce the world oil price?

Attributed to Libby Rittenberg and Timothy Tregarthen
Saylor URL: />
Saylor.org

733