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1)Interest rate is 4

Economics Oct 07, 2020

1)Interest rate is 4.11 Kazak Airline is planning to deposit $200,000 per month in an account for four years to accumulate enough money to build a new aircraft hangar . If the account pays 8 percent interest per year compounded quarterly, how much would Kazak Airline accumulate at the end of four years?

2)Suppose that apples and pears are substitutes. An early frost kills many apple trees. Which of the following will happen to the equilibrium price and quantity of pears?
a. Price of pears rises. Quantity of pears rises.
b. Price of pears rises. Quantity of pears falls.
c. Price of pears falls. Quantity of pears rises.
d. Price of pears falls. Quantity of pears falls.
e. Price of pears changes in an uncertain direction. Quantity of pears rises.
I know what the answer is, could someone please provide an explanation? Also, why does the quantity of pears rise? 

Expert Solution

1.n = 4*12 = 48
Monthly deposit = $200,000; interest per year compounded quarterly
i = 8%/12 = 0.0667%
FV = 200,000 (F/A, 0.0667%, 48)
FV = 200,000 * 56.34999
FV = 11,269,983.01

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