Question 1

Recently, Lisa's wealth increased by $500. If her wealth were to increase by another $500 in the near future, then her utility would increase, but not by as much as it increased with the recent increase to her wealth. Based on this information, Lisa's utility function

Accepted Answer

A)   and marginal utility function are both upward sloping.
B)   and marginal utility function are both downward sloping.
C)   is upward sloping and her marginal utility function is downward sloping.
D)   is downward sloping and her marginal utility function is upward sloping.E) All of the above
F) B) and D)

Question 2

Figure 9-1. The figure shows a utility function.
 
-Refer to Figure 9-1. For the person to whom this utility function applies,

Accepted Answer

A)   the more wealth she has, the less utility she gets from an additional dollar of wealth.
B)   the more wealth she has, the more utility she gets from an additional dollar of wealth.
C)   her level of satisfaction will be enhanced more by an increase in wealth from $600 to $800 than it would be by an increase in wealth from $400 to $600.
D)   her level of satisfaction will be enhanced equally by an increase in wealth from $600 to $800 or by an increase in wealth from $400 to $600.E) A) and B)
F) B) and C)

Question 3

Which, if any, of the present values below are correctly computed?

Accepted Answer

A)   A payment of $1,000 to be received one year from today, with a 8 percent interest rate, has a present value of $945.45.
B)   A payment of $1,000 to be received one year from today, with a 9 percent interest rate, has a present value of $911.11.
C)   A payment of $1,000 to be received one year from today, with a 10 percent interest rate, has a present value of $905.06.
D)   None of the above are correct to the nearest cent.E) None of the above
F) A) and B)

Question 4

The word "efficient" in the term "efficient markets hypothesis" refers to the idea that

Accepted Answer

A)   fundamental analysis is an efficient way to go about choosing which stocks to buy or sell.
B)   stock prices move upward and downward "efficiently," rather than following a "random walk."
C)   the stock market is "informationally efficient."
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 5

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 6

Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded

Accepted Answer

A)   rise, and investment spending rise.
B)   rise, and investment spending fall.
C)   fall, and investment spending rise.
D)   fall, and investment spending fall.E) C) and D)
F) All of the above

Question 7

Robert put $15,000 into an account with a fixed interest rate two years ago and now the account balance is $16,695.38. What rate of interest did Robert earn?

Accepted Answer

A)   4.5 percent
B)   5.5 percent
C)   6.5 percent
D)   8.0 percentE) A) and B)
F) A) and C)

Question 8

Lucky Hardware Store considered building a store in a new location. The owners and their accountants decided that this was not the profitable thing to do. However, soon after they made this decision, both the interest rate and the cost of building the store changed. In which case do these changes both make it more likely that they will now build the store?

Accepted Answer

A)   Interest rates rise and the cost of building the store rises.
B)   Interest rates rise and the cost of building the store falls.
C)   Interest rates fall and the cost of building the store rises.
D)   Interest rates fall and the cost of building the store falls.E) C) and D)
F) All of the above

Question 9

According to fundamental analysis, when choosing stocks for your portfolio, you should prefer undervalued stocks.

Accepted Answer

A) True 
 B)False

Question 10

You are expecting to receive $750 at some time in the future. Which of the following would unambiguously decrease the present value of this future payment?

Accepted Answer

A)   Interest rates rise and you get the payment sooner.
B)   Interest rates rise and you have to wait longer for the payment.
C)   Interest rates fall and you get the payment sooner.
D)   Interest rates fall and you have to wait longer to get the payment.E) A) and D)
F) A) and C)

Question 11

If you put $250 into an account with a 4 percent interest rate, how many years would you have to wait to have $432.92?

Accepted Answer

A)   10
B)   14
C)   17
D)   20E) A) and B)
F) A) and C)

Question 12

Which of the following has the highest future value?

Accepted Answer

A)   $100 saved for 2 years at 10 percent interest
B)   $110 saved for 2 years at 9 percent interest
C)   $120 saved for 2 years at 8 percent interest
D)   $130 saved for 2 years at 7 percent interestE) B) and C)
F) All of the above

Question 13

A scholarship gives you $1,000 today and promises to pay you $1,000 one year from today. What is the present value of these payments?

Accepted Answer

A)   $2,000/(1 + r) 2.
B)   $1,000 + $1,000/(1 + r) 
C)   $1,000/(1 + r)  + $1,000/(1 + r) 2
D)   $1,000(1 + r)  + $1,000(1 + r) 2E) A) and B)
F) A) and C)

Question 14

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 15

At an annual interest rate of 14 percent, about how many years will it take $100 to double in value?

Accepted Answer

A)   3
B)   4
C)   5
D)   7E) All of the above
F) C) and D)

Question 16

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value.

Accepted Answer

A)   Option 1; Option 2; Option 3
B)   Option 3; Option 2; Option 1
C)   Option 2; Option 3; Option 1
D)   Option 3; Option 1; Option 2E) A) and C)
F) B) and C)

Question 17

A firm has four different investment options. Option A will give the firm $10 million at the end of one year, $10 million at the end of two years, and $10 million at the end of three years. Option B will give the firm $5 million at the end of one year, $10 million at the end of two years, and $15 million at the end of three years. Option C will give the firm $15 million at the end of one year, $10 million at the end of two years, and $5 million at the end of three years. Option D will give the firm $21 million at the end of one year, nothing at the end of two years, and $9 million at the end of three years. Which of these options has the highest present value if the rate of interest is 5 percent?

Accepted Answer

A)   Option A
B)   Option B
C)   Option C
D)   Option DE) All of the above
F) C) and D)

Question 18

If you put $300 into an account paying 2 percent interest, what will be the value of this account in 4 years?

Accepted Answer

A)   $320.69
B)   $324.00
C)   $324.73
D)   $327.81E) C) and D)
F) B) and C)

Question 19

What is the present value of a payment of $150 one year from today if the interest rate is 6 percent?

Accepted Answer

A)   $141.11
B)   $141.36
C)   $141.75
D)   None of the above are correct to the nearest cent.E) C) and D)
F) A) and B)

Exam 9: The Basic Tools of Finance

You are expecting to receive $750 at some time in the future. Which of the following would unambiguously decrease the present value of this future payment?

Correct Answer
verified

At an annual interest rate of 14 percent, about how many years will it take $100 to double in value?

Correct Answer
verified

Figure 9-1. The figure shows a utility function. -Refer to Figure 9-1. For the person to whom this utility function applies,

Correct Answer
verified

Robert put $15,000 into an account with a fixed interest rate two years ago and now the account balance is $16,695.38. What rate of interest did Robert earn?

Correct Answer
verified

Correct Answer
verified

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value.

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

According to fundamental analysis, when choosing stocks for your portfolio, you should prefer undervalued stocks.

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

Recently, Lisa's wealth increased by $500. If her wealth were to increase by another $500 in the near future, then her utility would increase, but not by as much as it increased with the recent increase to her wealth. Based on this information, Lisa's utility function

Correct Answer
verified

Correct Answer
verified

The word "efficient" in the term "efficient markets hypothesis" refers to the idea that

Correct Answer
verified

If you put $300 into an account paying 2 percent interest, what will be the value of this account in 4 years?

Correct Answer
verified

Which of the following has the highest future value?

Correct Answer
verified

Which, if any, of the present values below are correctly computed?

Correct Answer
verified

What is the present value of a payment of $150 one year from today if the interest rate is 6 percent?

Correct Answer
verified

A scholarship gives you $1,000 today and promises to pay you $1,000 one year from today. What is the present value of these payments?

Correct Answer
verified

If you put $250 into an account with a 4 percent interest rate, how many years would you have to wait to have $432.92?

Correct Answer
verified

Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded

Correct Answer
verified

Exam 9: The Basic Tools of Finance

You are expecting to receive $750 at some time in the future. Which of the following would unambiguously decrease the present value of this future payment?

Correct AnswerverifiedShow Answer

At an annual interest rate of 14 percent, about how many years will it take $100 to double in value?

Correct AnswerverifiedShow Answer

Figure 9-1. The figure shows a utility function. -Refer to Figure 9-1. For the person to whom this utility function applies,

Correct AnswerverifiedShow Answer

Robert put $15,000 into an account with a fixed interest rate two years ago and now the account balance is $16,695.38. What rate of interest did Robert earn?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

You have a choice among three options. Option 1: receive $900 immediately. Option 2: receive $1,200 one year from now. Option 3: receive $2,000 five years from now. The interest rate is 15 percent. Rank these three options from highest present value to lowest present value.

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

According to fundamental analysis, when choosing stocks for your portfolio, you should prefer undervalued stocks.

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

Recently, Lisa's wealth increased by $500. If her wealth were to increase by another $500 in the near future, then her utility would increase, but not by as much as it increased with the recent increase to her wealth. Based on this information, Lisa's utility function

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The word "efficient" in the term "efficient markets hypothesis" refers to the idea that

Correct AnswerverifiedShow Answer

If you put $300 into an account paying 2 percent interest, what will be the value of this account in 4 years?

Correct AnswerverifiedShow Answer

Which of the following has the highest future value?

Correct AnswerverifiedShow Answer

Which, if any, of the present values below are correctly computed?

Correct AnswerverifiedShow Answer

What is the present value of a payment of $150 one year from today if the interest rate is 6 percent?

Correct AnswerverifiedShow Answer

A scholarship gives you $1,000 today and promises to pay you $1,000 one year from today. What is the present value of these payments?

Correct AnswerverifiedShow Answer

If you put $250 into an account with a 4 percent interest rate, how many years would you have to wait to have $432.92?

Correct AnswerverifiedShow Answer

Other things the same, an increase in the interest rate makes the quantity of loanable funds demanded

Correct AnswerverifiedShow 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
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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
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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Correct Answer
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Correct Answer
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