# Explain whether you would prefer to have \$225 today or wait five years for \$300 depends on the interest rate. Show your work.

Please answer the questions below. Your response to each question must be at least one paragraph in length. Explain your thoughts with theory and examples from the textbook if applicable.

1. For which of the two bonds in each example would you expect to generally pay the higher interest rate? Explain why.

1. A U.S. government bond or a Brazilian government bond

2. A U.S. government bond or a municipal bond with the same term and issued by a creditworthy municipality

3. A 6-month Treasury bill or a 20-year Treasury bond

4. A Microsoft bond or a bond issued by a new recording company

2. Identify each of the following acts as representing either saving or investment.

1. Fred uses some of his income to buy government bonds.

2. Julie takes some of her income and buys mutual funds.

3. Alex purchases a new truck for his delivery business using borrowed funds.

4. Elaine uses some of her income to buy stock in a major corporation.

5. Henrietta hires a builder to construct a new building for her bicycle shop.

3. Explain whether you would prefer to have \$225 today or wait five years for \$300 depends on the interest rate. Show your work.

4. Write the rule of 70. Suppose that your great-great-grandmother put \$50 in a savings account 100 years ago and the account is now worth \$1,600. Use the rule of 70 to determine about what interest rate she earned.

5. List three different ways that a risk-averse person can reduce financial risk by identifying the type of fiscal policy present.

6. Following the recession of 2001, there was a month in which employment and the unemployment rate both rose. Assuming the computation was correct, how is it possible for both to have increased?

7. Why might a favorable change in the economy, such as technological improvement or a decrease in the price of imported oil, be associated with an increase in frictional unemployment?

8. What is the theory of efficiency wages? Provide four reasons that employers might pay efficiency.

PART II

Directions: Read through the unemployment statistics on the website of the Bureau of Labor Statistics (http://www.bls.gov/cps/cps_htgm.htm). Choose at least three of the examples listed to determine if someone is or is not unemployed. Note the example, the answer according to the BLS web site, and whether you believe that is a logical and reasonable method of assessment for unemployment. Document your answers in a paper that is at least two to three pages in length. Your submission must be in APA format with at least one scholarly citation. Please utilize the LIRN library to help you get started with your research. You may visit the Academic Resource Center for a guide on how to utilize the LIRN library successfully.

PART III: Reflection Paper

Directions: Think to a time when you or someone you know was unemployed. What were the circumstances behind it? What ramifications did it have for the individual? How did you or the person you are writing about eventually find work? What can we do to limit our risk to unemployment? Your submission must be at least two pages in length and in APA forma

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