Jim nance has been offered and investment that will pay him $500 three years from today. 1. if his opportunity cost is 7% compounded annually, what value should he place on this opportunity today? 2. what is the most he should pat to purchase this payment today? 3. if he purchase this investment for less than the amount calculated in (1), what does it imply about the rate of return? $500, $408, his rate of return will exceed 7%. $408, $408, his rate of return will exceed 7%. $408, $408, his rate of return will be less than 7% $408, $408, his rate of return will equal to 7%.

5. understanding marginal and average tax rates consider the economy of citronia, where citizens consume only oranges. assume that oranges are priced at $1 each. the government has devised the following tax plans: plan a • consumption up to 1,000 oranges is taxed at 50%. • consumption higher than 1,000 oranges is taxed at 20%. plan b • consumption up to 2,000 oranges is taxed at 15%. • consumption higher than 2,000 oranges is taxed at 60%. use the plan a and plan b tax schemes to complete the following table by deriving the marginal and average tax rates under each tax plan at the consumption levels of 300 oranges, 1,200 oranges, and 3,000 oranges, respectively. consumption level plan a plan b (quantity of oranges) marginal tax rate average tax rate marginal tax rate average tax rate (percent) (percent) (percent) (percent) 300 1,200 3,000 complete the following table by indicating whether each plan is a progressive tax system, a proportional tax system, or a regressive tax system. progressive proportional regressive plan a plan b