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# What is the present value of \$100 realized two years from now if the interest rate is

ISBN: 9781429218276 428

## Solution for problem 5 Chapter Module 24

Krugman's Economics for AP* | 2nd Edition

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Problem 5

What is the present value of \$100 realized two years from now if the interest rate is 10%? a. \$80 b. \$83 c. \$90 d. \$100 e. \$110

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• If you buy \$2000 of cheese and sell half of it, expenses are \$1000 • If you sell it for a 50% markup, the revenue is 1.5 times the cost • Revenue = \$1500, income = \$1500 - \$1000 = \$500 Balance sheet leads to accounting equation • A=L+SE • All assets must be financed by stockholders equity and liabilities (debt) Liabilities (debt) are the senior claim and have the first opportunity to be paid • Debt may be secured • Collateral • Stockholders equity is the residual claim and gets what remains after the debt has been paid off

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