Question 1

Dollar amounts received at different points in time cannot be compared in absolute terms?

Accepted Answer

A) True 
 B)False

Question 2

How can we make a financial decision with cash flows occurring at different points in time?

Accepted Answer

We need to transform the cash flows to a

Question 3

Which of the following statements is INCORRECT?

Accepted Answer

A)  We refer to (1 - rf) as the interest rate factor for risk-free cash flows. 
B)  We define the risk-free interest rate (rf) for a given period as the interest rate at which money can be borrowed or lent without risk over that period. 
C)  For most financial decisions, costs and benefits occur at different points in time. 
D)  In general, money today is worth more than money in one year. 
A)  We refer to (1 - rf) as the interest rate factor for risk-free cash flows. 
B)  We define the risk-free interest rate (rf) for a given period as the interest rate at which money can be borrowed or lent without risk over that period. 
C)  For most financial decisions, costs and benefits occur at different points in time. 
D)  In general, money today is worth more than money in one year.

Question 4

Whenever a good trades in a competitive market, the price the good trades for determines the value of the good.

Accepted Answer

A) True 
 B)False

Question 5

A mining company is offering to trade you 7250 tonnes of low-grade copper ore for 5000 tonnes of high-grade copper ore. Assuming you currently have 5000 tonnes of high-grade ore, what should you do?

Accepted Answer

Don't trade. Colooma should keep the hig

Question 6

If $15,000 is invested at 10% per year, in approximately how many years will the investment double?

Accepted Answer

A)  7.3 years 
B)  14.8 years 
C)  10.6 years 
D)  8.4 years 
A)  7.3 years 
B)  14.8 years 
C)  10.6 years 
D)  8.4 years

Question 7

Samantha enters a rent-to-own agreement for living room furniture. She will pay $60 per month
for one year. Which of the following shows the timeline for her payments if the first payment is one
month from now?

Accepted Answer

A)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Date } \
\text { (Months) }
\end{array} & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 & 11 & 12 \
\hline \text { Cash } & - \$ 60 & - \$ 12 & - \$ 18 & - \$ 24 & - \$ 30 & - \$ 36 & - \$ 48 & - \$ 54 & - \$ 60 & - \$ 66 & - \$ 72 & - \$ 78 & - \$ 84 \
\text { Flows } & & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Date } \
\text { (Months) }
\end{array} & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 & 11 & 12 \
\hline \begin{array} { l } 
\text { Cash } \
\text { Flows }
\end{array} & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Date } \
\text { (Months) }
\end{array} & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 & 11 & 12 \
\hline \begin{array} { l } 
\text { Cash } \
\text { Flows }
\end{array} & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Date } \
\text { (Months) }
\end{array} & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 & 11 & 12 \
\hline \begin{array} { l } 
\text { Cash } \
\text { Flows }
\end{array} & 0 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 \
\hline
\end{array}$$ 
A)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Date } \
\text { (Months) }
\end{array} & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 & 11 & 12 \
\hline \text { Cash } & - \$ 60 & - \$ 12 & - \$ 18 & - \$ 24 & - \$ 30 & - \$ 36 & - \$ 48 & - \$ 54 & - \$ 60 & - \$ 66 & - \$ 72 & - \$ 78 & - \$ 84 \
\text { Flows } & & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 & 0 \
\hline
\end{array}$$ 
B)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Date } \
\text { (Months) }
\end{array} & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 & 11 & 12 \
\hline \begin{array} { l } 
\text { Cash } \
\text { Flows }
\end{array} & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 \
\hline
\end{array}$$ 
C)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Date } \
\text { (Months) }
\end{array} & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 & 11 & 12 \
\hline \begin{array} { l } 
\text { Cash } \
\text { Flows }
\end{array} & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 \
\hline
\end{array}$$ 
D)  $$\begin{array} { | l | l | l | l | l | l | l | l | l | l | l | l | l | l | } 
\hline \begin{array} { l } 
\text { Date } \
\text { (Months) }
\end{array} & 0 & 1 & 2 & 3 & 4 & 5 & 6 & 7 & 8 & 9 & 10 & 11 & 12 \
\hline \begin{array} { l } 
\text { Cash } \
\text { Flows }
\end{array} & 0 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 & - \$ 60 \
\hline
\end{array}$$

Question 8

Samantha has holdings of 250 ounces of platinum, currently valued at $815 dollars per ounce. She estimates that the price of platinum will rise to $850 per ounce in the next year. If the interest rate is 8%, should she sell the platinum today?

Accepted Answer

A)  Yes, as the difference between selling now and selling in one year is $7550 dollars today. 
B)  Yes, as the difference between selling now and selling in one year is $5513 dollars today. 
C)  Yes, as the difference between selling now and selling in one year is $6991 dollars today. 
D)  No, as the difference between selling now and selling in one year is -$6988 dollars today. 
A)  Yes, as the difference between selling now and selling in one year is $7550 dollars today. 
B)  Yes, as the difference between selling now and selling in one year is $5513 dollars today. 
C)  Yes, as the difference between selling now and selling in one year is $6991 dollars today. 
D)  No, as the difference between selling now and selling in one year is -$6988 dollars today.

Question 9

$\begin{array} { l l c c l } 
\text { Country } & \text { Chile } & \text { Iceland } & \text { New Zealand } & \text { South Africa } \
\hline \begin{array} { l } 
\text { Abalone Cost } \
\text { Exchange }
\end{array} & \text { CLP 50,990,000 } & \text { ISK 5,400,000 } & \text { NZD 104,000 } & \text { ZAR 640,000 } \
\text { Rate: } \$ 1 \text { U.S. } = & 585 \text { CLP } & 61 \text { ISK } & 1.3 \text { NZD } & 7.8 \text { ZAR }
\end{array}$
-Refer to the table above. An international seafood supplier is offered 9.45 million yen today for 1000 pounds of abalone frozen in the shell. The abalone can be sourced from various countries at the prices shown above. The current market exchange rates between Australia and the other relevant currencies are also shown. In addition, $1 AUD = 105 yen. What is the value of the best deal the international seafood supplier can make, in Australian dollars?

Accepted Answer

A)  $5000 
B)  $10,000 
C)  $7000 
D)  $8000 
A)  $5000 
B)  $10,000 
C)  $7000 
D)  $8000

Dollar amounts received at different points in time cannot be compared in absolute terms?

How can we make a financial decision with cash flows occurring at different points in time?

Which of the following statements is INCORRECT?

Whenever a good trades in a competitive market, the price the good trades for determines the value of the good.

A mining company is offering to trade you 7250 tonnes of low-grade copper ore for 5000 tonnes of high-grade copper ore. Assuming you currently have 5000 tonnes of high-grade ore, what should you do?

If $15,000 is invested at 10% per year, in approximately how many years will the investment double?

Samantha enters a rent-to-own agreement for living room furniture. She will pay $60 per month for one year. Which of the following shows the timeline for her payments if the first payment is one month from now?

Samantha has holdings of 250 ounces of platinum, currently valued at $815 dollars per ounce. She estimates that the price of platinum will rise to $850 per ounce in the next year. If the interest rate is 8%, should she sell the platinum today?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bond Valuation

Share Valuation: the Dividend-Discount Model

Investment Decision Rules

Fundamentals of Capital Budgeting

Share Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Capital

Debt Financing

Capital Structure

Payout Policy

Filters

Exam 3: Time Value of Money: an Introduction

Dollar amounts received at different points in time cannot be compared in absolute terms?

How can we make a financial decision with cash flows occurring at different points in time?

Which of the following statements is INCORRECT?

Whenever a good trades in a competitive market, the price the good trades for determines the value of the good.

A mining company is offering to trade you 7250 tonnes of low-grade copper ore for 5000 tonnes of high-grade copper ore. Assuming you currently have 5000 tonnes of high-grade ore, what should you do?

If $15,000 is invested at 10% per year, in approximately how many years will the investment double?

Samantha enters a rent-to-own agreement for living room furniture. She will pay $60 per month for one year. Which of the following shows the timeline for her payments if the first payment is one month from now?

Samantha has holdings of 250 ounces of platinum, currently valued at $815 dollars per ounce. She estimates that the price of platinum will rise to $850 per ounce in the next year. If the interest rate is 8%, should she sell the platinum today?

Corporate Finance and the Financial Manager

Introduction to Financial Statement Analysis

Time Value of Money: Valuing Cash Flow Streams

Interest Rates

Bond Valuation

Share Valuation: the Dividend-Discount Model

Investment Decision Rules

Fundamentals of Capital Budgeting

Share Valuation: a Second Look

Risk and Return in Capital Markets

Systematic Risk and the Equity Risk Premium

The Cost of Capital

Raising Capital

Debt Financing

Capital Structure

Payout Policy

Filters