1. (Consumption, Saving, and Time) Explain why the supply of loanable funds curve slopes upward to the right.

2. (Present Value) Calculate the present value of each of the following future payments. (For some of these problems you may wish to use the on-line calculator available at http://www.moneychimp.com/articles/finworks/fmpresval.htm
a. A $10,000 lump sum received 1 year from now if the market interest rate is 8 percent.
b. A $10,000 lump sum received 2 years from now if the market interest rate is 10 percent.

3. (Securities Exchanges) What role do securities exchanges play in financing corporations?

4. Although the article is dated, please read Jane Katz, “Who Should Be in Charge,” in the Federal Reserve Bank of Boston’s Regional Review at http://www.bos.frb.org/economic/nerr/rr1997/fall/katz97_4.htm What are some of the issues in corporate finance as outlined by Katz? Do they hold true today? Briefly discuss.

5. (Corporate Finance) Describe the three ways in which corporations acquire funds for investment.

6. Do you think it is possible to predict the future price of stocks? Briefly discuss.??

7. if you have $50,000 to invest in the financial markets. Which financial instrument do you prefer? Stocks? or Bonds? Why???

8. (Present Value of an Income Stream) Suppose the market interest rate is 10 percent. Would you be willing to lend $10,000 if you were guaranteed to receive $1,000 at the end of each of the next 12 years plus a $5,000 payment 15 years from now? Why or why not???

9. (Why Interest Rates Differ) At any given time, a range of interest rates prevails in the economy. What are some factors
that contribute to differences among interest rates???

10. In many states with lotteries, people can take their winnings in a single, discounted, lump-sum payment or in a series of annual payments for 20 or 30 years. What factors should a winner consider in determining how to take the money??