Question 1
XXXXXX XXXXX will receive $1 million in 50 years. The discount rate is 14. As an alternative, she can receive $2,000 today. Which should she choose?
A. the $1 million dollars in 50 years
B. $2,000 today
C. She should be indifferent.
D. need more information
Question 2
Dr. J. wants to buy a Dell computer which will cost $2,788 four years from today. He would like to set aside an equal amount at the end of each year in order to accumulate the amount needed. He can earn 7% annual return. How much should he set aside?
A. $627.93
B. $697.00
C. $823.15
D. $531.81
Question 3
Mr. Fish wants to build a house in 10 years. He estimates that the total cost will be $170,000. If he can put aside $10,000 at the end of each year, what rate of return must he earn in order to have the amount needed?
A. Between 11% and 12%
B. Between 8% and 9%
C. 17%
D. none of the above
Question 1
The shorter the length of time between a present value and its corresponding future value:
A. the lower the present value, relative to the future value.
B. the higher the present value, relative to the future value.
C. the higher the interest rate used in the present-valuation.
D. none of the above
Question 2
A dollar today is worth more than a dollar to be received in the future because:
A. the dollar can be invested today and earn interest.
B. of the risk of nonpayment in the future.
C. inflation will reduce purchasing power of a future dollar.
D. none of the above
Question 3
The higher the rate used in determining the future value of a $1 annuity:
A. the smaller the future value at the end of the period.
B. the greater the future value at the end of a period.
C. the greater the present value at the beginning of a period.
D. None of the above — the interest has no effect on the future value of an annuity.
Question 1
Mr. Darden is selling his house for $165,000. He bought it for $55,000 nine years ago. What is the annual return on his investment?
A. 3%
B. Between 14% and 16%
C. 13%
D. none of the above
Question 2
Increasing the number of periods will increase all of the following EXCEPT:
A. the present value of an annuity.
B. the present value of $1.
C. the futuare value of $1.
D. the future value of an annuity.
Question 3
Dr. J. wants to buy a Dell computer which will cost $2,788 four years from today. He would like to set aside an equal amount at the end of each year in order to accumulate the amount needed. He can earn 7% annual return. How much should he set aside?
A. $627.93
B. $697.00
C. $823.15
D. $531.81
Question 1
The market allocates capital to companies based on:
A. risk.
B. efficiency.
C. expected returns.
D. all of the above
Question 2
Which of the following financial assets is likely to have the highest required rate of return based on risk?
A. Corporate bond
B. Treasury bill
C. Certificate of Deposit
D. Common stock
Question 3
A bond that has a yield to maturity greater than its coupon interest rate will sell for a price:
A. below par.
B. at par.
C. above par.
D. that is equal to the face value of the bond plus the value of all interest payments.
Question 1
Which of the following is not one of the components that makes up the required rate of return on a bond?
A. Risk premium
B. Real rate of return
C. Inflation premium
D. Maturity payment
Question 2
A 20-year bond pays 12% on a face value of $1,000. If similar bonds are currently yielding 9%, What is the market value of the bond? Use annual analysis.
A. over $1,000
B. under $1,000
C. over $1,200
D. Not enough information given to tell
Question 3
A ten-year bond, with par value equals $1000, pays 10% annually. If similar bonds are currently yielding 6% annually, what is the market value of the bond? Use semi-annual analysis.
A. $1,000
B. $1127.50
C. $1297.85
D. $2549.85
