1. A market research firm conducted a study and compiled the following table with respect to the...
Question:
1. A market research firm conducted a study and compiled the following table with respect to the total number of happiness derived by the students from tea and tacos. For example, one glass of tea creates 10 utils of happiness, while 2 glasses of tea provides a total of 14 utils of happiness. Assume that tea cost $1.00 per glass and tacos cost $2.00 each and that Denise has exactly $4.00 to spend. According to economic principles, how should she spend her money?
| unit | Total utils from Tea | unit | Total utils from tacos |
| 1 | 10 | 1 | 18 |
| 2 | 14 | 2 | 34 |
| 3 | 15 | 3 | 48 |
| 4 | 15.5 | 4 | 50 |
| | a. | 0 tea and 2 tacos |
| | b. | 4 teas and 0 tacos |
| | c. | 1 tea and 1 taco |
| | d. | 2 teas and 2 tacos |
| | e. | 2 teas and 1 taco |
2. Jack and Diane are lottery winners. They hold the ticket to the Grand Prize in the “Set for Life” Prize that makes 20 consecutive annual payments of $50,000 starting immediately. There is one hitch: the eleventh payment (to be received at the end of year 10) is not $50,000 but only $20,000 (that is, this payment is $30,000 LESS than the other 20). Which of the following comes closest to the present value of the prize if interest rates are 5%?
| | a. | $ 686,430 |
| | b. | $ 551,529 |
| | c. | $ 591,154 |
| | d. | $ 743,867 |
| | e. | $ 635,849 |
3. Jensen Corporations’ bonds were issued two years ago and have 8 more years till maturity. The bonds were issued at $1,000 par, but the latest market price has fallen to $975 and the bonds have a yield to maturity of 11.5%. Based on this information, what coupon rate is attached to the bond?
| | a. | 13% |
| | b. | 11% |
| | c. | 14% |
| | d. | 15% |
| | e. | 12% |
Expert Answer:
