Professor Kremepuff's New, User-Friendly Textbook Has Just Been Published

question 14

Multiple Choice

Professor Kremepuff's new, user-friendly textbook has just been published.This book will be used in classes for two years, after which it will be replaced by a new edition.The publisher charges a price of p₁ in the first year and p₂ in the second year.After the first year, bookstores buy back used copies for p₂/2 and resell them to students in the second year for p₂.(Students are indifferent between new and used copies.) The cost to a student of owning the book during the first year is therefore p₁ - p₂/2.In the first year of publication, the number of students willing to pay $v to own a copy of the book for a year is 80,000 - 1,000v.The number of students taking the course in the first year who are willing to pay $w to keep the book for reference rather than sell it at the end of the year is 80,000 - 5,000w.The number of persons who are taking the course in the second year and are willing to pay at least $p for a copy of the book is 75,000 - 1,000p.If the publisher sets a price of p₁ in the first year and p₂ <= p₁ in the second year, then the total number of copies of the book that the publisher sells over the two years will be

• A)160,000 - 1,000p₁ - 1,000p₂.
• B)160,000 - 1,000(p₁ - p₂/2).
• C)160,000 - 3,000p₂.
• D)155,000 - 1,000(p₁ + p₂/2).
• E)155,000 - 1,500p₂.

Calculate the effective annual rate (EAR) for different compounding frequencies.

Determine the number of payments or the duration required to repay a loan under various interest rates and compounding periods.

Identify the necessary rate of return to meet a specific financial goal.

Compare different investment or loan options based on their effective interest rates or returns.

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Definitions:

Bill Of Sale

A legal document that details a transaction between two parties, transferring ownership of personal property from the seller to the buyer.

Exchange

A marketplace or platform where securities, currencies, commodities, or other financial instruments are traded between two parties.

Performance

The execution, accomplishment, or fulfillment of a task, work, or function as specified or expected.

Erect

To construct, build up, or establish something in an upright position.