What Is the Maximum You Should Be Willing to Pay

question 8

Multiple Choice

What is the maximum you should be willing to pay for the right to receive $500 a month forever if the quoted annual interest rate (APR) is a constant 15%? Round your answer to the
Nearest dollar.

• A)$49,383
• B)$57,500
• C)$40,000
• D)none of the above

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Definitions:

Board of Governors

A governing body or executive committee that oversees the policy-making, management, and proper conduct of an organization, institution, or central bank.

New York Federal Reserve

One of the 12 Federal Reserve Banks of the United States, it plays a key role in monetary policy, financial supervision, and the payment system.

Interest On Reserves

The rate paid by central banks to financial institutions on the excess reserves they hold at the central bank.

Money Supply

The complete financial assets volume in an economy at a designated point in time.