Question 1

The present value of expected future profits will if the discount rate increases and will if expected future profits increase.

Accepted Answer

A)  increase; not change 
B)  increase; increase 
C)  not change; decrease 
D)  decrease; increase 
E)  decrease; decrease 
A)  increase; not change 
B)  increase; increase 
C)  not change; decrease 
D)  decrease; increase 
E)  decrease; decrease D

Question 2

You borrow money from Fast Eddie's Fast Cash at 20% per year interest and agree to pay $500 at the end of each of the next four years.You must have borrowed approximately:

Accepted Answer

A)  $2,000. 
B)  $1,595. 
C)  $1,295. 
D)  $1,095. 
E)  $895. 
A)  $2,000. 
B)  $1,595. 
C)  $1,295. 
D)  $1,095. 
E)  $895. C

Question 3

If the annual interest rate is 25%,the present discounted value of $100 to be received in one year is:

Accepted Answer

A)  $75. 
B)  $80. 
C)  $100. 
D)  $120. 
E)  $125. 
A)  $75. 
B)  $80. 
C)  $100. 
D)  $120. 
E)  $125. B

Question 4

You buy your child a $100 savings bond that matures in 10 years and pays an annual interest rate of 10%.At maturity the bond will be worth:

Accepted Answer

A)  $228.17. 
B)  $200. 
C)  $259.37. 
D)  $271.17. 
E)  $217.71. 
A)  $228.17. 
B)  $200. 
C)  $259.37. 
D)  $271.17. 
E)  $217.71.

Question 5

If the annual interest rate is i,the present value of $X to be received at the end of each future year forever is:

Accepted Answer

A)  $X/(1 + i). 
B)  $X/i. 
C)  $X/(1 + i)n. 
D)  $X/i n. 
E)  $Xn/i n. 
A)  $X/(1 + i). 
B)  $X/i. 
C)  $X/(1 + i)n. 
D)  $X/i n. 
E)  $Xn/i n.

Question 6

If the annual interest rate is i,the present value of $X to be received at the end of each of the next n years is:

Accepted Answer

A)  $X/i. 
B)  $X/(1 + i)n. 
C)  $ \$ X \sum_{t=1}^{n} 1 /(1+i)^{t} $ 
D)  $X[(1 + i)n] / [ i(1 + i)n - 1]. 
E)  $X / [i(1 + i)n - 1]. 
A)  $X/i. 
B)  $X/(1 + i)n. 
C)  $ \$ X \sum_{t=1}^{n} 1 /(1+i)^{t} $ 
D)  $X[(1 + i)n] / [ i(1 + i)n - 1]. 
E)  $X / [i(1 + i)n - 1].

Question 7

You've just won the $25 million lottery.You are going to receive a check for $1 million today and at the end of every year for the next 24 years.If the interest rate is 10%,the present value of your prize is:

Accepted Answer

A)  $8,984,744. 
B)  $9,984,744. 
C)  $12,984,744. 
D)  $20,000,000. 
E)  $25,000,000. 
A)  $8,984,744. 
B)  $9,984,744. 
C)  $12,984,744. 
D)  $20,000,000. 
E)  $25,000,000.

Question 8

If the annual interest rate is i,the present value of a payment of $X to be received n years from now forever is:

Accepted Answer

A)  $X/(1 + i). 
B)  $X/i. 
C)  $X/(1 + i )n. 
D)  $X/i n. 
E)  none of the above. 
A)  $X/(1 + i). 
B)  $X/i. 
C)  $X/(1 + i )n. 
D)  $X/i n. 
E)  none of the above.

Question 9

Your mortgage requires that you pay $12,000 at the end of each of the next 30 years.If the annual interest rate is 12%,then you must have borrowed approximately:

Accepted Answer

A)  $117,660. 
B)  $96,660. 
C)  $78,660. 
D)  $63,660. 
E)  $133,660. 
A)  $117,660. 
B)  $96,660. 
C)  $78,660. 
D)  $63,660. 
E)  $133,660.

The present value of expected future profits will if the discount rate increases and will if expected future profits increase.

You borrow money from Fast Eddie's Fast Cash at 20% per year interest and agree to pay $500 at the end of each of the next four years.You must have borrowed approximately:

If the annual interest rate is 25%,the present discounted value of $100 to be received in one year is:

You buy your child a $100 savings bond that matures in 10 years and pays an annual interest rate of 10%.At maturity the bond will be worth:

If the annual interest rate is i,the present value of $X to be received at the end of each future year forever is:

If the annual interest rate is i,the present value of $X to be received at the end of each of the next n years is:

You've just won the $25 million lottery.You are going to receive a check for $1 million today and at the end of every year for the next 24 years.If the interest rate is 10%,the present value of your prize is:

If the annual interest rate is i,the present value of a payment of $X to be received n years from now forever is:

Your mortgage requires that you pay $12,000 at the end of each of the next 30 years.If the annual interest rate is 12%,then you must have borrowed approximately:

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Filters

Exam 19: Appendix Problems

The present value of expected future profits will if the discount rate increases and will if expected future profits increase.

You borrow money from Fast Eddie's Fast Cash at 20% per year interest and agree to pay $500 at the end of each of the next four years.You must have borrowed approximately:

If the annual interest rate is 25%,the present discounted value of $100 to be received in one year is:

You buy your child a $100 savings bond that matures in 10 years and pays an annual interest rate of 10%.At maturity the bond will be worth:

If the annual interest rate is i,the present value of $X to be received at the end of each future year forever is:

If the annual interest rate is i,the present value of $X to be received at the end of each of the next n years is:

You've just won the $25 million lottery.You are going to receive a check for $1 million today and at the end of every year for the next 24 years.If the interest rate is 10%,the present value of your prize is:

If the annual interest rate is i,the present value of a payment of $X to be received n years from now forever is:

Your mortgage requires that you pay $12,000 at the end of each of the next 30 years.If the annual interest rate is 12%,then you must have borrowed approximately:

Introduction

Demand Theory

Consumer Behavior and Rational Choice

Estimating Demand Functions

Production Theory

The Analysis of Costs

Perfect Competition

Monopoly and Monopolistic Competition

Managerial Use of Price Discrimination

Bundling and Intrafirm Pricing

Oligopoly

Game Theory

Auctions

Risk Analysis

Principalagent Issues and Managerial Compensation

Adverse Selection

Government and Business

Optimization Techniques

Filters