Question 1

The last $2,000 of Samantha's wealth adds less to her utility than the previous $2,000.Based on this information,Samantha has

Accepted Answer

A)  increasing marginal utility of wealth and is risk averse
B)  increasing marginal utility of wealth and is not risk averse
C)  decreasing marginal utility of wealth and is risk averse
D)  decreasing marginal utility of wealth and is not risk averseE) All of the above
F) B) and C)

Question 2

HydroGrow is considering building a new building in which to grow tomatoes.The board meets and decides that this is the right thing to do.Before they can put their plans into action,the interest rate increases.The present value of the returns from this investment project

Accepted Answer

A)  falls, and so Hydro Grow is less likely to build the building.
B)  falls, and so HydroGrow is more likely to build the building.
C)  rise, and so HydroGrow is less likely to build the building.
D)  rise, and so HydroGrow is more likely to build the building.E) A) and C)
F) B) and D)

Question 3

You are given three options.You may have the balance in an account that has been collecting 5 percent interest for 20 years,the balance in an account that has been collecting 10 percent interest for 10 years,or the balance in an account that has been collecting 20 percent interest for five years.Each account had the same original balance.Which account now has the lowest balance?

Accepted Answer

A)  the first one
B)  the second one
C)  the third one
D)  It doesn't matter; they all have the same balance.E) B) and C)
F) A) and C)

Question 4

A firm has three different investment options,each costing $10 million.Option A will generate $12 million in revenue at the end of one year.Option B will generate $15 million in revenue at the end of two years.Option C will generate $18 million in revenue at the end of three years.Which option should the firm choose?

Accepted Answer

A)  Option A
B)  Option B
C)  Option C
D)  The answer depends on the rate of interest.E) A) and B)
F) B) and C)

Question 5

Diversification can reduce firm-specific risk.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following is the largest?

Accepted Answer

A)  the future value of $250 with 3% interest for 2 years
B)  the future value of $250 at 2% interest for 3 years
C)  the present value of $250 to be paid in two years when the interest rate is 3%
D)  the present value of $250 to be paid in three years when the interest rate is 2%E) B) and D)
F) B) and C)

Question 7

Sari puts $100 in an account with an interest rate of 10 percent.According to the rule of 70,about how much does she have at the end of 21 years?

Accepted Answer

A)  $210
B)  $300
C)  $800
D)  $1,010E) A) and D)
F) None of the above

Question 8

Which of the following changes would increase 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)  a decrease in the interest rate
D)  All of the above are correct.E) B) and C)
F) A) and C)

Question 9

At which interest rate is the present value of $162.24 two years from today equal to $150 today?

Accepted Answer

A)  4 percent
B)  5 percent
C)  6 percent
D)  None of the above would give a present value within a penny of $162.24.E) C) and D)
F) B) and D)

Question 10

Natasha promises to pay Jennifer $1,000 in two years.If the interest rate is 6 percent,how many dollars today is this future payment worth?

Accepted Answer

A)  $883.60
B)  $887.97
C)  $893.67
D)  None of the above are correct to the nearest penny.E) All of the above
F) C) and D)

Question 11

Speculative bubbles may arise in part because the value of the stock to a stockholder depends on the final sale price.

Accepted Answer

A) True 
 B)False

Question 12

Three years ago Halley put $1,200 in an account paying 2 percent interest.How much is the account worth today?

Accepted Answer

A)  $1,225.38
B)  $1,248.48
C)  $1,264.72
D)  $1,273.45E) A) and B)
F) B) and D)

Question 13

Mixster Concrete Company is considering buying a new cement truck.The owners and their accountants decide that this is the profitable thing to do.Before they can buy the truck,the interest rate and price of trucks change.In which case do these changes both make them less likely to buy the truck?

Accepted Answer

A)  both interest rates and price of trucks rise
B)  both interest rates and the price of trucks fall
C)  the interest rate rises and the price of trucks fall
D)  the interest rate falls and the price of trucks risesE) A) and B)
F) All of the above

Question 14

A risk-averse person

Accepted Answer

A)  would necessarily not play a game where she had a 50 percent chance of winning $1 and a 50 percent chance of losing $1.
B)  would necessarily not play a game where she had a 75 percent chance of winning $1 and a 25 percent chance of losing $1.
C)  Both A and B.
D)  Neither A nor B.E) A) and B)
F) C) and D)

Question 15

The value of a stock depends on the ability of the company to generate dividends and the expected price of the stock when the stockholder sells her shares.

Accepted Answer

A) True 
 B)False

Question 16

If you put $250 in an account with a 4 percent interest rate,how many years would you have to wait to have about $370.06?

Accepted Answer

A)  10
B)  14
C)  17
D)  20E) None of the above
F) A) and B)

Question 17

A risk averse person

Accepted Answer

A)  has a utility curve where the slope increases with wealth, and might take a bet with a 60 percent chance of wining $100 and a 40 per chance of losing $100.
B)  has a utility curve where the slope increases with wealth, and would never take a bet with a 60 percent chance of wining $100 and a 40 per cent chance of losing $100.
C)  has a utility curve where the slope decreases with wealth, and might take a bet with a 60 percent chance of wining $100 and a 40 per chance of losing $100.
D)  has a utility curve where the slope decreases with wealth, and would never take a bet with a 60 percent chance of wining $100 and a 40 per cent chance of losing $100.E) B) and D)
F) B) and C)

Question 18

At which interest rate is the present value of $79.50 one year from today equal to $75 today?

Accepted Answer

A)  4 percent
B)  5 percent
C)  6 percent
D)  7 percentE) B) and D)
F) A) and C)

Question 19

What's the difference between firm-specific risk and market risk? Will diversification eliminate one or both? Explain.

Accepted Answer

Market risk refers to economywide risk c...

Question 20

Managed mutual funds usually outperform mutual funds that are supposed to follow some stock index.

Accepted Answer

A) True 
 B)False

Exam 27: The Basic Tools of Finance

HydroGrow is considering building a new building in which to grow tomatoes.The board meets and decides that this is the right thing to do.Before they can put their plans into action,the interest rate increases.The present value of the returns from this investment project

Correct Answer
verified

At which interest rate is the present value of $79.50 one year from today equal to $75 today?

Correct Answer
verified

Correct Answer
verified

Managed mutual funds usually outperform mutual funds that are supposed to follow some stock index.

Correct Answer
verified

The last $2,000 of Samantha's wealth adds less to her utility than the previous $2,000.Based on this information,Samantha has

Correct Answer
verified

Mixster Concrete Company is considering buying a new cement truck.The owners and their accountants decide that this is the profitable thing to do.Before they can buy the truck,the interest rate and price of trucks change.In which case do these changes both make them less likely to buy the truck?

Correct Answer
verified

Which of the following is the largest?

Correct Answer
verified

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

Correct Answer
verified

If you put $250 in an account with a 4 percent interest rate,how many years would you have to wait to have about $370.06?

Correct Answer
verified

Diversification can reduce firm-specific risk.

Correct Answer
verified

Speculative bubbles may arise in part because the value of the stock to a stockholder depends on the final sale price.

Correct Answer
verified

What's the difference between firm-specific risk and market risk? Will diversification eliminate one or both? Explain.

Correct Answer
verified
Market risk refers to economywide risk c...
View Answer

At which interest rate is the present value of $162.24 two years from today equal to $150 today?

Correct Answer
verified

A risk averse person

Correct Answer
verified

Correct Answer
verified

A risk-averse person

Correct Answer
verified

Three years ago Halley put $1,200 in an account paying 2 percent interest.How much is the account worth today?

Correct Answer
verified

Natasha promises to pay Jennifer $1,000 in two years.If the interest rate is 6 percent,how many dollars today is this future payment worth?

Correct Answer
verified

Sari puts $100 in an account with an interest rate of 10 percent.According to the rule of 70,about how much does she have at the end of 21 years?

Correct Answer
verified

The value of a stock depends on the ability of the company to generate dividends and the expected price of the stock when the stockholder sells her shares.

Correct Answer
verified

Exam 27: The Basic Tools of Finance

HydroGrow is considering building a new building in which to grow tomatoes.The board meets and decides that this is the right thing to do.Before they can put their plans into action,the interest rate increases.The present value of the returns from this investment project

Correct AnswerverifiedShow Answer

At which interest rate is the present value of $79.50 one year from today equal to $75 today?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Managed mutual funds usually outperform mutual funds that are supposed to follow some stock index.

Correct AnswerverifiedShow Answer

The last $2,000 of Samantha's wealth adds less to her utility than the previous $2,000.Based on this information,Samantha has

Correct AnswerverifiedShow Answer

Mixster Concrete Company is considering buying a new cement truck.The owners and their accountants decide that this is the profitable thing to do.Before they can buy the truck,the interest rate and price of trucks change.In which case do these changes both make them less likely to buy the truck?

Correct AnswerverifiedShow Answer

Which of the following is the largest?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

If you put $250 in an account with a 4 percent interest rate,how many years would you have to wait to have about $370.06?

Correct AnswerverifiedShow Answer

Diversification can reduce firm-specific risk.

Correct AnswerverifiedShow Answer

Speculative bubbles may arise in part because the value of the stock to a stockholder depends on the final sale price.

Correct AnswerverifiedShow Answer

What's the difference between firm-specific risk and market risk? Will diversification eliminate one or both? Explain.

Correct AnswerverifiedMarket risk refers to economywide risk c...View AnswerShow Answer

At which interest rate is the present value of $162.24 two years from today equal to $150 today?

Correct AnswerverifiedShow Answer

A risk averse person

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A risk-averse person

Correct AnswerverifiedShow Answer

Three years ago Halley put $1,200 in an account paying 2 percent interest.How much is the account worth today?

Correct AnswerverifiedShow Answer

Natasha promises to pay Jennifer $1,000 in two years.If the interest rate is 6 percent,how many dollars today is this future payment worth?

Correct AnswerverifiedShow Answer

Sari puts $100 in an account with an interest rate of 10 percent.According to the rule of 70,about how much does she have at the end of 21 years?

Correct AnswerverifiedShow Answer

The value of a stock depends on the ability of the company to generate dividends and the expected price of the stock when the stockholder sells her shares.

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
Market risk refers to economywide risk c...
View Answer

Correct Answer
verified

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
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