Question

O At an annual interest rate of 10 percent, about how many years will it take $100 to double in value? O a. 11 b.5 O 0.9 O d. 7 O é

Answer 1

1. Rate =10%
FV =200
PV =100
FV=PV*(1+r)^n
200=100*(1+10%)^n
applying log on both sides
n=log(2)/log(1.10) =7.3 years (Option d is correct option)

2. FV =PV*(1+r)^n=800*(1+7%) =856 (Option c is correct option)

3. Option b is correct

Moral hazard   means risk for one  party or loss for only one party even though there has been an exchange by two parties. It occurs due to asymmetric information which means a party has more information about particular transaction than the other party.

4.at 8% PV =FV/(1+r)^n =20000/(1+8%)^4=14700.60(is less than payment)
at 7% PV =FV/(1+r)^n =20000/(1+7%)^4=15257.90(is less than payment)
at 6% PV =FV/(1+r)^n =20000/(1+6%)^4=15841.87(is less than payment)
Option d all of the options is correct