Nancy is considering forming a 5 year business partnership with Claudia. Nancy believes her portion of the partnership will generate the following profits:
Year Profits Present Value
1 $2,000
2 $4,000
3 $12,000
4 $15,000
5 $18,000
Nancy's appropriate discount rate is 6%. To join the partnership, Nancy needs to invest $30,000. Does the partnership offer a rate of return in excess of 6%?
As the table below indicates, the present value of the partnership is in excess of the $30,000 investment. This implies the partnership offers a rate of return greater than 6%. In this case, Nancy should join the partnership.
Year Profits Present Value
1 $2,000 1,886.79
2 $4,000 3,559.99
3 $12,000 10,075.43
4 $15,000 11,881.41
5 $18,000 13,450.65
TOTAL $40,854.27
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The main argument against Fed independence is that
A) in a democracy elected officials should make public policy. B) monetary and fiscal policy would be easier to coordinate if the Fed were not independent. C) the Fed has proven irresponsible on many occasions. D) congressional control was tried during the 1960s and it worked well.
Figure 19-3
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Of the graphs in Figure 19-3, where the dotted line shows the actual exchange rate, which one shows a country with an overvalued currency and a balance of trade deficit?
A. 1 B. 2 C. 3 D. 4