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Chapter 16

Chapter 16. Interest Rates, Investments, and Capital Markets. Table 16.01 Interest and the Frequency of Compounding. Table 16.02 Future Value, FV , to which $1 Grows by the End of Year t at Various Interest Rates, i , Compounded Annually,$.

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Chapter 16

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  1. Chapter 16 Interest Rates, Investments, and Capital Markets

  2. Table 16.01 Interest and the Frequency of Compounding

  3. Table 16.02 Future Value, FV, to which $1 Grows by the End of Year t at Various Interest Rates, i, Compounded Annually,$

  4. Table 16.03 Present Value, PV, of a Payment $1 at the End of Year t at Various Interest Rates, i, Compounded Annually,$

  5. Figure 16.01 Present Value of a Dollar in the Future Present value, PV , of $1 $1 i = 0% 90 80 70 60 50 40 30 20 10 i = 10% i = 5% = 20% i 0 10 20 30 40 50 60 70 80 90 100 t , Years

  6. Table 16.04 Present value, PV of a Flow of $10 a Year for t Years at Various Interest Rates, i, Compounded Annually,$

  7. Figure 16.02 Annual Earnings of High School and College Graduates Annual earnings, Thousands of 1995 dollars 40 Benefit College graduate 30 20 High school graduate 10 Cost 0 – 10 18 22 30 40 50 60 70 Age, Years

  8. Table 16.05 Present Value of Earnings

  9. Figure 16.03 Price of an Exhaustible Resource p , $ per unit _ p Price p 1 m 1 T Time, Years

  10. Table 16.06 Price and Quantity of Coal Reflecting the Amount of Coal and the Interest Rate

  11. Figure 16.04 First-Year Price in a Two-Period Model First-year price of coal, p , $ per pound 1 190.48 150 100 50 0 100 200 300 400 Q , Amount of coal in the ground

  12. Figure p16.01 Redwood Trees Real price of old-growth redwoods 300 250 200 150 100 50 0 1953 1956 1959 1962 1965 1968 1971 1974 1977 1980 1983

  13. Figure 16.05 Price of Oil over Time Real price of crude oil 10 8 6 4 2 0 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990

  14. Figure 16.06 Capital Market Equilibrium Interest rate, 1 S i , % per year 2 S e 1 i 1 e 2 i 2 D Q Quantity of funds per year Q 1 2

  15. Figure 16.07 How Government Borrowing Squeezes Out Private Investment (a) Private Sector (b) Government (c) Market i , % per year i , % per year i , % per year S D p 2 D g 1 D g e i i i 2 2 2 2 i i i e 1 1 1 1 2 D 1 D 1 2 2 1 1 2 Q Q Q Q Q Q p p g g Quantity of funds per year Quantity of funds per year Quantity of funds per year

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