Assume There Are No Prospective Investment Projects (I) That Will

question 138

Multiple Choice

Assume there are no prospective investment projects (I) that will yield an expected rate of return (r) of 25 percent or more, but there are $5 billion of investment opportunities with an expected rate of
Return between 20 and 25 percent, an additional $5 billion between 15 and 20 percent, and so on.
The investment demand curve for this economy is shown in which table?

• A) \[\begin{array} { | c | r | }
• \hline r & l \\
• \hline 25 \% & \$ 10 \\
• \hline 20 & 15 \\
• \hline 15 & 20 \\
• \hline 10 & 25 \\
• \hline 5 & 30 \\
• \hline 0 & 35 \\
• \hline
• \end{array}\]
• B) \[\begin{array} { | c | r | }
• \hline r & l\\
• \hline 25 \% & \$ 0 \\
• \hline 20 & 5 \\
• \hline 15 & 10 \\
• \hline 10 & 15 \\
• \hline 5 & 20 \\
• \hline 0 & 25 \\
• \hline
• \end{array}\]
• C) \(\begin{array} { | c | c | }
• \hline r & l \\
• \hline 20 \% & \$ 10 \\
• \hline 15 & 20 \\
• \hline 10 & 30 \\
• \hline 5 & 40 \\
• \hline 0 & 50 \\
• \hline
• \end{array}\)
• D) \[\begin{array} { | c | c | }
• \hline r & l \\
• \hline 25 \% & \$ 5 \\
• \hline 20 & 10 \\
• \hline 15 & 15 \\
• \hline 10 & 20 \\
• \hline 5 & 25 \\
• \hline 0 & 30 \\
• \hline
• \end{array}\]

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Definitions:

Pre-Contribution Gain

The increase in value of an asset or investment before it is contributed to a retirement plan or investment account.

Appreciated Property

Property that has increased in value over time, which can impact capital gains tax when sold.

Partnership Interest

An ownership share in a partnership that represents the holder's stake in the partnership's profits, losses, and capital.

FMV

Fair Market Value, the price that a willing buyer and seller would agree on when both parties are informed and under no pressure to trade.