Question

31) Suppose you just won a small lottery that pays you 20,000 at the beginning of each year for three years. The lottery is also willing to pay you an all-at-once payment of $57,000 today instead of 20,000 per year at the beginning of each year. If the interest rate is at 9 percent, should you take the all-at-once payment of $57,000 or $20,000 per year at the beginning of each year?

Group of answer choices

Take the three-year payments, which has a FV of approximately $71,462

Take the all-at-once payment, which has a FV of approximately $73,817

Take the three-year payments, which has a FV of approximately $73,817

Take the all-at-once payment, which has a FV of approximately $60,000

43) Suppose that the residents of Vegi-Topia spend all of their income on cauliflower, broccoli, and carrots. In 2013, they buy 50 heads of cauliflower for $2 each, 60 bunches of broccoli for $1.5 each, and 200 carrots for $0.10. In 2014, they buy 75 heads of cauliflower for $2 each, 70 bunches of broccoli for $1.50 each, and 500 carrots for $0.20 each.   In 2015, they buy 80 heads of cauliflower for $3, 90 bunches of broccoli for $2, and 500 carrots for $0.25 each. If the base year is 2015, what is the CPI in 2013 & 2014?

Group of answer choices

CPI (2013) is approximately 63 and CPI (2014) is approximately 100.

CPI (2013) is approximately 39 and CPI (2014) is approximately 65.

CPI (2013) is approximately 63 and CPI (2014) is approximately 72

CPI (2013) is approximately 39 and CPI (2014) is approximately 72.

49) Suppose that the residents of Vegi-Topia spend all of their income on cauliflower, broccoli, and carrots. In 2013, they buy 50 heads of cauliflower for $2 each, 60 bunches of broccoli for $1.5 each, and 200 carrots for $0.10. In 2014, they buy 75 heads of cauliflower for $2 each, 70 bunches of broccoli for $1.50 each, and 500 carrots for $0.20 each.    In 2015, they buy 80 heads of cauliflower for $3, 90 bunches of broccoli for $2, and 500 carrots for $0.25 each. If the base year is 2015, what is the inflation for 2014?

Group of answer choices

Approximately 5%

Approximately 14%

Approximately 69%

Approximately 40%

Answer 1

31. Ans: Take the all-at-once payment, which has a FV of approximately $73,817

Explanation:

FV of three year payment = 20,000(F/P, 9%, 3) + 20,000(F/P, 9%, 2) + 20,000(F/P, 9%, 1)

                                         = 20,000(1.2950) + 20,000(1.1881) + 20,000(1.090)

                                         = 25,900 + 23,762 + 21,800

                                         = 71,462

FV of all-at-once payment = 57,000(F/P, 9%, 3)

                                           = 57,000(1.29503)

                                           = $73,817

43. Ans: CPI (2013) is approximately 63 and CPI (2014) is approximately 72.

Explanation:

Let us take the base year quantity as fixed basket of goods for CPI calculation.

Cost of basket of goods in 2015 = ($3 * 80) + ($2 * 90) + ($0.25 * 500) = 240 + 180 + 125 = $545

Cost of basket of goods in 2014= ($2 * 80) + ($1.50 * 90) + ($0.20 * 500) = 160 + 135 + 100 = $395

Cost of basket of goods in 2013 = ($2 * 80) + ($1.50 * 90) + ($0.10 * 500) = 160 + 135 + 50 = $345

CPI in 2015 = (545 / 545) * 100 = 100

CPI in 2014 = (395 / 545) * 100 = 72

CPI in 2013 = (345 / 545) * 100 = 63

49. Ans: Approximately 14%

Explanation:

Inflation rate in 2014 = [(72 - 63) / 63] * 100 = 14%