Question 1

On the Internet you find the following offers for opening an online account.Which of them is the best offer if you have $2,000 to save for two years?

Accepted Answer

A)   an interest rate of 5 percent,with the bank charging you a $15 processing fee at the time you open your account
B)   an interest rate of 3.5 percent,with the bank giving you a $35 bonus to open your account
C)   an interest rate of 4 percent,with the bank giving you a $20 bonus at the time you open your account
D)   an interest rate of 4.5 percent,with no processing fee and no bonusE) B) and D)
F) A) and C)

Question 2

Which of the following is the correct expression for finding the present value of a $500 payment two years from today if the interest rate is 4 percent?

Accepted Answer

A)   $500/(1.04) 2
B)   $500 - 500(1.04) 2
C)   $500 - $500/(.04) 2
D)   None of the above is correct.E) A) and D)
F) All of the above

Question 3

In general,as a person includes fewer stocks and more bonds in his portfolio,

Accepted Answer

A)   both risk and expected return rise.
B)   risk rises but expected return falls.
C)   risk falls,but expected return rises.
D)   both risk and expected return fall.E) A) and D)
F) None of the above

Question 4

Susan put $375 into an account and one year later had $405.What interest rate was paid on Susan's deposit?

Accepted Answer

A)   5 percent
B)   7 percent
C)   8 percent
D)   10 percentE) All of the above
F) C) and D)

Question 5

At an annual interest rate of 10 percent,about how many years will it take $100 to triple in value?

Accepted Answer

A)   8
B)   10
C)   12
D)   14E) B) and D)
F) None of the above

Question 6

James offers you $1,000 today or $X in 7 years.If the interest rate is 4.5 percent,then you would prefer to take the $1,000 today if and only if

Accepted Answer

A)   X 
B)   X 
C)   X 
D)   X < 1,360.86.E) None of the above
F) All of the above

Question 7

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

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) All of the above
F) B) and D)

Question 8

If the efficient market hypothesis is correct,then

Accepted Answer

A)   index funds should typically beat managed funds,and usually do.
B)   index fund should typically beat managed funds,but usually do not.
C)   mutual funds should typically beat index funds,and usually do.
D)   mutual funds should typically beat index funds,but usually do not.E) A) and C)
F) C) and D)

Question 9

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 10

Imagine that someone offers you $X today or $1,500 in 5 years.If the interest rate is 6 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 > 1,213.33.
D)   X > 1,338.26.E) A) and B)
F) B) and C)

Question 11

From the standpoint of the economy as a whole,the role of insurance is to greatly reduce or eliminate the risks inherent in life.

Accepted Answer

A) True 
 B)False

Question 12

On the Internet you find the following offers for opening an online account.Which of them is the best offer if you have $5,000 to save for two years?

Accepted Answer

A)   an interest rate of 5 percent,with the bank charging you a $50 processing fee at the time you open your account
B)   an interest rate of 4 percent,with the bank giving you a $65 bonus at the time you open your account
C)   an interest rate of 3.5 percent,with the bank giving you a $100 bonus to open your account
D)   an interest rate of 4.5 percent,with no processing fee and no bonusE) A) and D)
F) A) and C)

Question 13

From the standpoint of the economy as a whole,the role of insurance is not to eliminate the risks inherent in life.Then what is its purpose?

Accepted Answer

To spread these risk...

Question 14

Marcus puts a greater proportion of his portfolio into government bonds.Marcus's action

Accepted Answer

A)   increases both risk and the average rate of return.
B)   decreases both risk and the average rate of return.
C)   increases risk,but decreases the average rate of return.
D)   decreases risk,but increases the average rate of return.E) B) and C)
F) A) and D)

Question 15

Al,Ralph,and Stan are all intending to retire.Each currently has $1 million in assets.Al will earn 16% interest and retire in two years.Ralph will earn 8% interest and retire in four years.Stan will earn 4% interest and retire in eight years.Who will have the largest sum when he retires?

Accepted Answer

A)   Al
B)   Ralph
C)   Stan
D)   They all retire with the same amount.E) A) and B)
F) A) and C)

Question 16

If a person is risk averse,then she has

Accepted Answer

A)   diminishing marginal utility of wealth,implying that her utility function gets flatter as wealth increases.
B)   diminishing marginal utility of wealth,implying that her utility function gets steeper as wealth increases.
C)   increasing marginal utility of wealth,implying that her utility function gets flatter as wealth increases.
D)   increasing marginal utility of wealth,implying that her utility function gets steeper as wealth increases.E) A) and B)
F) A) and C)

Question 17

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 18

People who are risk averse dislike bad outcomes more than they like comparable good outcomes.

Accepted Answer

A) True 
 B)False

Question 19

As the interest rate increases,the present value of future sums decreases,so firms will find fewer investment projects profitable.

Accepted Answer

A) True 
 B)False

Question 20

If your research leads you to believe that the present value of a stock's dividend stream and future price is less than its price then you believe the stock is

Accepted Answer

A)   overvalued so you should consider buying it.
B)   overvalued so you should not consider buying it.
C)   undervalued so you should consider buying it.
D)   undervalued so you should not consider buying it.E) B) and C)
F) A) and B)

Exam 27: The Basic Tools of Finance

Marcus puts a greater proportion of his portfolio into government bonds.Marcus's action

Correct AnswerverifiedShow Answer

On the Internet you find the following offers for opening an online account.Which of them is the best offer if you have $5,000 to save for two years?

Correct AnswerverifiedShow Answer

From the standpoint of the economy as a whole,the role of insurance is to greatly reduce or eliminate the risks inherent in life.

Correct AnswerverifiedShow Answer

If a person is risk averse,then she has

Correct AnswerverifiedShow Answer

Which of the following is the correct expression for finding the present value of a $500 payment two years from today if the interest rate is 4 percent?

Correct AnswerverifiedShow Answer

Susan put $375 into an account and one year later had $405.What interest rate was paid on Susan's deposit?

Correct AnswerverifiedShow Answer

If your research leads you to believe that the present value of a stock's dividend stream and future price is less than its price then you believe the stock is

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

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

Correct AnswerverifiedShow Answer

James offers you $1,000 today or $X in 7 years.If the interest rate is 4.5 percent,then you would prefer to take the $1,000 today if and only if

Correct AnswerverifiedShow Answer

At an annual interest rate of 10 percent,about how many years will it take $100 to triple in value?

Correct AnswerverifiedShow Answer

As the interest rate increases,the present value of future sums decreases,so firms will find fewer investment projects profitable.

Correct AnswerverifiedShow Answer

From the standpoint of the economy as a whole,the role of insurance is not to eliminate the risks inherent in life.Then what is its purpose?

Correct AnswerverifiedTo spread these risk...View AnswerShow Answer

People who are risk averse dislike bad outcomes more than they like comparable good outcomes.

Correct AnswerverifiedShow Answer

Al,Ralph,and Stan are all intending to retire.Each currently has $1 million in assets.Al will earn 16% interest and retire in two years.Ralph will earn 8% interest and retire in four years.Stan will earn 4% interest and retire in eight years.Who will have the largest sum when he retires?

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

If the efficient market hypothesis is correct,then

Correct AnswerverifiedShow Answer

Imagine that someone offers you $X today or $1,500 in 5 years.If the interest rate is 6 percent,then you would prefer to take the $X today if and only if

Correct AnswerverifiedShow Answer

In general,as a person includes fewer stocks and more bonds in his portfolio,

Correct AnswerverifiedShow Answer

On the Internet you find the following offers for opening an online account.Which of them is the best offer if you have $2,000 to save for two years?

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
To spread these risk...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified