Principles of Investment

Question 1

This investment is best considered

Revolt · Accepted Answer

high risk with the potential for a high return.

Question 2

Which statement best explains the interest rates related to this CD?

Revolt · Accepted Answer

The nominal interest rate is 3 percent, while the real interest rate is 1 percent.

Question 3

How much interest will Michael earn on this CD in the first year, based on the nominal interest rate?

Revolt · Accepted Answer

$600

Question 4

How much interest will Michael earn on this CD in the first year, based on the real interest rate?

Revolt · Accepted Answer

$200

Question 5

Question 5

Revolt · Accepted Answer

The state tax Patrick must pay on the initial profit is .: $346.25; The federal tax he must pay on the initial profit is .: $1,731.25

Question 6

✔ $200$400$600

Revolt · Accepted Answer

✔ $200; Annie must pay in taxes to the state government on her investment.: $200; She also must pay in taxes to the federal government.: $1,000; As a result of the money she will lose to taxes, the real value of Annie’s profit is .: $2,800

Question 7

$800✔ $1,000$1,200

Revolt · Accepted Answer

✔ $1,000

Question 8

$2,200✔ $2,800$3,000

Revolt · Accepted Answer

✔ $2,800

Question 9

$350✔ $346.25$450

Revolt · Accepted Answer

✔ $346.25; The state tax Patrick must pay on the initial profit is .: $346.25; The federal tax he must pay on the initial profit is .: $1,731.25

Question 10

$1,750✔ $1,731.25$2,100.75

Revolt · Accepted Answer

✔ $1,731.25

Principles of Investment Answers

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