Why are present value calculations used in real options?
Real options involve decisions that are irreversible once they have been made. Generalizations
of present value calculations can determine the value of postponing such irreversible decisions.
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If you purchased a newly issued 30-year bond from American Airlines with a face value of $1,000 and a coupon payment of 3 percent, American Airlines would pay you
A) $33.33 per year plus 3 percent per year for 30 years. B) $30 per year for 30 years. C) $30 per year for 30 years plus $1,000 at the end of the 30th year. D) $33.33 per year for 30 years plus $1,000 at the end of the 30th year.
Refer to Figure 26-3. In the figure above, when the money supply shifts from MS1 to MS2, at the interest rate of 3 percent households and firms will
A) sell Treasury bills. B) neither buy nor sell Treasury bills. C) want to hold more money. D) buy Treasury bills.