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: 2% 4% 6% 8% 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? 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 with the collection? On what factors does your answer depend? 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: http://www.saylor.org/books/ Saylor.org 733