An Investor Wants to Determine How Much Interest He Must

question 6

Multiple Choice

An investor wants to determine how much interest he must earn to be able to make the payments on a 10-year mortgage which has increasing annual payments. The problem is summarized in the accompanying spreadsheet. The investor has enough money to make an initial investment of $9,000 and hopes he can earn 12%, compounded quarterly, on his investments. He would like to know how low his annual return can be and still allow him to make his payments from interest income. What constraint must be entered in the Risk Solver Platform (RSP) task pane?

• A) $D$7:$D$16  $E$7:$E$16
• B) $C$7:$D$16  $E$7:$E$16
• C) $C$7:$C$16  $E$7:$E$16
• D) $D$7:$D$16  $E$7:$E$16

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Definitions:

Supply Curve

A graphical representation showing the relationship between the price of a good and the quantity supplied by producers.

Minimum Point

The lowest point on a curve, often referring to the least cost or output level in various economic or mathematical models.

ATC Curve

The line that graphically represents the average total costs of production at various levels of output.

Purely Competitive

A market structure characterized by many small firms producing identical products, where no single firm can influence the market price.