1. the present value of an infinite stream of dollar payments of $z (that starts next year) is $z/i when the nominal interest rate, i, is constant. this formula gives the price of a consol -a bond paying a fixed nominal payment each year, forever. it is also a good approximation for the present discounted value of a stream of constant payments over long but not infinite periods, as long as i is constant 1.1. suppose i-1096. let $z-100, what is the present value of the consol? 12. ifi-10%, what is the expected present discounted value of a bond that pays $z over the next 10 years? 20 years? 30 years? (hint: use the formula from chapter 14, but remember to adjust for the first payment. 1.3. repeat the calculations in (1.1) and (1.2) for i-2% and 1-5%.

Aprice ceiling is “binding” if the price ceiling is set below the equilibrium price. suppose that the equilibrium price is $5. if a price ceiling is set at $6, this will not affect the market in any way since $5 remains a legally allowable price (since $5 < $6). a price ceiling of $6 is called a “non-binding” price ceiling. on the other hand, if the price ceiling is set at $4, the price ceiling is “binding” because the natural equilibrium price is $5 but that is no longer allowed. what happens when there is a binding price ceiling? at a price below the equilibrium price, quantity demanded exceeds quantity supplied. there is a shortage. normally, price increases eliminate shortages by increasing quantity supplied and decreasing quantity demanded. in this case, however, price increases are not allowed past the price ceiling. we therefore predict that the observed market price will be right at the price ceiling and there will be a permanent shortage. the observed quantity bought and sold will be dictated by the quantity supplied at the price ceiling. although consumers would like to buy more, there are no more units for sale

Salt corporation's contribution margin ratio is 78% and its fixed monthly expenses are $30,000. assume that the company's sales for may are expected to be $89,000. required: estimate the company's net operating income for may, assuming that the fixed monthly expenses do not change.

Do it! review 16-3 the assembly department for right pens has the following production data for the current month. beginning work in process units transferred out ending work in process 0 22,500 16,000 materials are entered at the beginning of the process. the ending work in process units are 70% complete as to conversion costs. compute the equivalent units of production for (a) materials and (b) conversion costs. materials conversion costs the equivalent units of production