Author Question: The Canadian government introduced the Tax-Free Savings Account (TFSA) in 2009, which allows ... (Read 61 times)

warrenjean01 · **on:** Oct 12, 2022

Question 1

The formula to calculate the present value of a future payment of $X received t years from now when the annual percentage interest rate is i is
◦ PV = $X/i.
◦ PV = $X/(1 + i)t.
◦ PV = $X(1 + i)t.
◦ PV = $X/(1 + i).
◦ PV = $X(1 + i).

Question 2

The Canadian government introduced the Tax-Free Savings Account (TFSA) in 2009, which allows Canadians to earn tax-free investment returns on a limited amount of savings each year. In theory, and all else remaining equal, what do we expect the effect of such a policy to be on the market for financial capital?
◦ The supply of savings curve shifts right, the equilibrium interest rate falls and investment increases.
◦ The investment demand curve shifts right, the equilibrium interest rate rises and investment rises.
◦ The investment demand curve shifts left, the equilibrium interest rate falls and investment falls.
◦ The supply of saving curve shifts left, the equilibrium interest rate rises and investment decreases.
◦ There will be no effect on the market for financial capital.

hillard sane · **Reply #1 on:** Oct 12, 2022

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