Question 1

Hector puts $150 into an account when the interest rate is 4 percent. Later he checks his balance and finds he has about $168.73. How long did Hector wait to check his balance?

Accepted Answer

A)   3 years
B)   3.5 years
C)   4 years
D)   4.5 yearsE) All of the above
F) C) and D)

Question 2

Suppose that fundamental analysis indicates a particular company's stock is overvalued.

Accepted Answer

A)   This means its present value is less than its price. You should consider adding the stock to your portfolio.
B)   This means its present value is less than its price. You shouldn't consider adding the stock to your portfolio.
C)   This means its present value is more than its price. You should consider adding the stock to your portfolio.
D)   This means its present value is more than its price. You shouldn't consider adding the stock to your portfolio.E) B) and D)
F) B) and C)

Question 3

Suppose the interest rate is 8 percent. Consider three payment options:Suppose the interest rate is 8 percent. Consider three payment options: 1. $200 today.
2)  $220 one year from today.
3)  $240 two years from today.
Which of the following is correct?

Accepted Answer

A)   Option 1 has the highest present value and Option 2 has the lowest.
B)   Option 2 has the highest present value and Option 3 has the lowest.
C)   Option 3 has the highest present value and Option 1 has the lowest.
D)   None of the above is correct.E) All of the above
F) B) and C)

Question 4

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest, and at the end of the N years you have $4,082.59. What is the number of years, N?

Accepted Answer

A)   4
B)   5
C)   6
D)   7E) B) and D)
F) A) and B)

Question 5

Write the formula for finding the future value in n years of $x today.

Accepted Answer

The answer of Write the formula for finding the future...

Question 6

Braden says that $400 saved for one year at 4 percent interest has a smaller future value than $400 saved for two years at 2 percent interest. Lefty says that the present value of $400 to be received one year from today if the interest rate is 4 percent exceeds the present value of $400 to be received two years from today if the interest rate is 2 percent.

Accepted Answer

A)   Braden and Lefty are both correct.
B)   Braden and Lefty are both incorrect.
C)   Only Braden is correct.
D)   Only Lefty is correct.E) A) and D)
F) A) and C)

Question 7

Clint puts $200 into an account when the interest rate is 8 percent. Later he checks his balance and finds that he has a balance of about $272.10. How many years did Clint wait to check his balance?

Accepted Answer

A)   3 years
B)   3.5 years
C)   4 years
D)   4.5 yearsE) All of the above
F) C) and D)

Question 8

According to the efficient markets hypothesis, which of the following would decrease the price of stock in Veblen's Leisure Company?

Accepted Answer

A)   Veblen announces, just as everyone had expected, that it has fired its CEO who has been accused of ethics violations.
B)   Veblen announces, as the market had expected, that its profits were low.
C)   Fundamental analysis published by KM Financial shows that Veblen's stock is undervalued.
D)   A highly anticipated book is published by a Veblen insider which details Veblen's innovative technology in plain English, information that was previously unavailable to the public and which will now be used by Veblen's competitors.E) None of the above
F) B) and C)

Question 9

Imagine that someone offers you $X today or $1,500 in 5 years. If the interest rate is 4 percent, then you would prefer to take the $X today if and only if

Accepted Answer

A)   X > 1,055.56.
B)   X > 1,120.89.
C)   X > 1,232.89.
D)   X > 1,338.26.E) All of the above
F) A) and B)

Question 10

Which of the following changes would decrease the present value of a future payment?

Accepted Answer

A)   a decrease in the size of the payment
B)   an increase in the time until the payment is made
C)   an increase in the interest rate
D)   All of the above are correct.E) A) and B)
F) B) and C)

Question 11

An increase in the interest rate causes a decrease in the future value of $1,000 that you have in a bank account today.

Accepted Answer

A) True 
 B)False

Question 12

Using the rule of 70, about how much would $100 be worth after 50 years if the interest rate were 7 percent?

Accepted Answer

A)   $400
B)   $800
C)   $1,600
D)   $3,200E) A) and C)
F) A) and B)

Question 13

Demonstrate that whether you would prefer to have $225 today or wait five years for $300 depends on the interest rate. Show your work.

Accepted Answer

For example at 3 percent the p...

Question 14

What is the present value of a payment of $200 to be made one year from today if the interest rate is 10 percent?

Accepted Answer

A)   $180
B)   $181.82
C)   $220
D)   $222.22E) C) and D)
F) None of the above

Question 15

Robert put $15,000 into an account with a fixed interest rate two years ago and now the account balance is $16,917.66. What rate of interest did Robert earn?

Accepted Answer

A)   4.5 percent
B)   5.4 percent
C)   6.2 percent
D)   8.0 percentE) B) and C)
F) None of the above

Question 16

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

Accepted Answer

A)   $95.50
B)   $95.24
C)   $95.00
D)   None of the above are correct to the nearest cent.E) B) and D)
F) None of the above

Question 17

If the interest rate is 8 percent, then the present value of $1,000 to be received in 4 years is $735.03.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following actions best illustrates moral hazard?

Accepted Answer

A)   A person adds risky stock to his portfolio.
B)   A person who has narrowly avoided many accidents applies for automobile insurance.
C)   A person is unwilling to buy a stock when she believes its price has an equal chance of rising or falling $10.
D)   A person purchases homeowners insurance and then checks his smoke detector batteries less frequently.E) B) and D)
F) B) and C)

Question 19

Lucretia puts $400 into an account when the interest rate is 10 percent. Later she checks her balance and finds it's worth about $708.62. How many years did she wait to check her balance?

Accepted Answer

A)   5 years
B)   6 years
C)   7 years
D)   8 yearsE) A) and D)
F) B) and D)

Question 20

Figure 27-1. The figure shows a utility function. 
-Refer to Figure 27-1. Which distance along the vertical axis represents the marginal utility of an increase in wealth from $600 to $800?

Accepted Answer

A)   the distance between the origin and point B
B)   the distance between the origin and point C
C)   the distance between point A and point C
D)   the distance between point B and point CE) All of the above
F) B) and D)

Exam 14: The Basic Tools of Finance

Correct Answer
verified

Lucretia puts $400 into an account when the interest rate is 10 percent. Later she checks her balance and finds it's worth about $708.62. How many years did she wait to check her balance?

Correct Answer
verified

Suppose that fundamental analysis indicates a particular company's stock is overvalued.

Correct Answer
verified

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest, and at the end of the N years you have $4,082.59. What is the number of years, N?

Correct Answer
verified

Hector puts $150 into an account when the interest rate is 4 percent. Later he checks his balance and finds he has about $168.73. How long did Hector wait to check his balance?

Correct Answer
verified

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

Correct Answer
verified

Robert put $15,000 into an account with a fixed interest rate two years ago and now the account balance is $16,917.66. What rate of interest did Robert earn?

Correct Answer
verified

Using the rule of 70, about how much would $100 be worth after 50 years if the interest rate were 7 percent?

Correct Answer
verified

Figure 27-1. The figure shows a utility function. -Refer to Figure 27-1. Which distance along the vertical axis represents the marginal utility of an increase in wealth from $600 to $800?

Correct Answer
verified

According to the efficient markets hypothesis, which of the following would decrease the price of stock in Veblen's Leisure Company?

Correct Answer
verified

What is the present value of a payment of $200 to be made one year from today if the interest rate is 10 percent?

Correct Answer
verified

Which of the following actions best illustrates moral hazard?

Correct Answer
verified

If the interest rate is 8 percent, then the present value of $1,000 to be received in 4 years is $735.03.

Correct Answer
verified

Suppose the interest rate is 8 percent. Consider three payment options:Suppose the interest rate is 8 percent. Consider three payment options: 1. $200 today. 2) $220 one year from today. 3) $240 two years from today. Which of the following is correct?

Correct Answer
verified

An increase in the interest rate causes a decrease in the future value of $1,000 that you have in a bank account today.

Correct Answer
verified

Imagine that someone offers you $X today or $1,500 in 5 years. If the interest rate is 4 percent, then you would prefer to take the $X today if and only if

Correct Answer
verified

Write the formula for finding the future value in n years of $x today.

Correct Answer
verified

Clint puts $200 into an account when the interest rate is 8 percent. Later he checks his balance and finds that he has a balance of about $272.10. How many years did Clint wait to check his balance?

Correct Answer
verified

Which of the following changes would decrease the present value of a future payment?

Correct Answer
verified

Demonstrate that whether you would prefer to have $225 today or wait five years for $300 depends on the interest rate. Show your work.

Correct Answer
verified
For example at 3 percent the p...
View Answer

Exam 14: The Basic Tools of Finance

Correct AnswerverifiedShow Answer

Lucretia puts $400 into an account when the interest rate is 10 percent. Later she checks her balance and finds it's worth about $708.62. How many years did she wait to check her balance?

Correct AnswerverifiedShow Answer

Suppose that fundamental analysis indicates a particular company's stock is overvalued.

Correct AnswerverifiedShow Answer

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest, and at the end of the N years you have $4,082.59. What is the number of years, N?

Correct AnswerverifiedShow Answer

Hector puts $150 into an account when the interest rate is 4 percent. Later he checks his balance and finds he has about $168.73. How long did Hector wait to check his balance?

Correct AnswerverifiedShow Answer

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

Correct AnswerverifiedShow Answer

Robert put $15,000 into an account with a fixed interest rate two years ago and now the account balance is $16,917.66. What rate of interest did Robert earn?

Correct AnswerverifiedShow Answer

Using the rule of 70, about how much would $100 be worth after 50 years if the interest rate were 7 percent?

Correct AnswerverifiedShow Answer

Figure 27-1. The figure shows a utility function. -Refer to Figure 27-1. Which distance along the vertical axis represents the marginal utility of an increase in wealth from $600 to $800?

Correct AnswerverifiedShow Answer

According to the efficient markets hypothesis, which of the following would decrease the price of stock in Veblen's Leisure Company?

Correct AnswerverifiedShow Answer

What is the present value of a payment of $200 to be made one year from today if the interest rate is 10 percent?

Correct AnswerverifiedShow Answer

Which of the following actions best illustrates moral hazard?

Correct AnswerverifiedShow Answer

If the interest rate is 8 percent, then the present value of $1,000 to be received in 4 years is $735.03.

Correct AnswerverifiedShow Answer

Suppose the interest rate is 8 percent. Consider three payment options:Suppose the interest rate is 8 percent. Consider three payment options: 1. $200 today. 2) $220 one year from today. 3) $240 two years from today. Which of the following is correct?

Correct AnswerverifiedShow Answer

An increase in the interest rate causes a decrease in the future value of $1,000 that you have in a bank account today.

Correct AnswerverifiedShow Answer

Imagine that someone offers you $X today or $1,500 in 5 years. If the interest rate is 4 percent, then you would prefer to take the $X today if and only if

Correct AnswerverifiedShow Answer

Write the formula for finding the future value in n years of $x today.

Correct AnswerverifiedShow Answer

Clint puts $200 into an account when the interest rate is 8 percent. Later he checks his balance and finds that he has a balance of about $272.10. How many years did Clint wait to check his balance?

Correct AnswerverifiedShow Answer

Which of the following changes would decrease the present value of a future payment?

Correct AnswerverifiedShow Answer

Demonstrate that whether you would prefer to have $225 today or wait five years for $300 depends on the interest rate. Show your work.

Correct AnswerverifiedFor example at 3 percent the p...View AnswerShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
For example at 3 percent the p...
View Answer