Question 1

When someone buys a bond,they give up the bond's price in exchange for

Accepted Answer

A)  Right of ownership 
B)  Future income 
C)  Current income 
D)  Stock 
A)  Right of ownership 
B)  Future income 
C)  Current income 
D)  Stock

Question 2

The difference between the present discount value of a revenue stream and the present discount value of a cost stream is called the

Accepted Answer

A)  Interest rate 
B)  Net present value 
C)  Net cash flow 
D)  Profit 
A)  Interest rate 
B)  Net present value 
C)  Net cash flow 
D)  Profit

Question 3

The difference between revenue and cost during a single year of a project's life is called the

Accepted Answer

A)  Interest rate 
B)  Net present value 
C)  Net cash flow 
D)  Profit 
A)  Interest rate 
B)  Net present value 
C)  Net cash flow 
D)  Profit

Question 4

Suppose you make a $5,000 investment that will return $3,000 in year 2 and another $3,500 in year 4.With an interest rate of 4.5%,what is the NPV of this project?

Accepted Answer

A)  $247.34 
B)  $682.15 
C)  $1,500.00 
D)  $2,162.50 
A)  $247.34 
B)  $682.15 
C)  $1,500.00 
D)  $2,162.50

Question 5

At an interest rate of 8.25% compounded annually,what is the present discounted value of $2000 to be received 2 years from now?

Accepted Answer

A)  $1670.00 
B)  $1706.78 
C)  $1716.74 
D)  $1835.00 
A)  $1670.00 
B)  $1706.78 
C)  $1716.74 
D)  $1835.00

Question 6

You have made an investment of $250 that will yield a profit of $30 in one year.If the interest rate is 11.5%,what is your internal rate of return?

Accepted Answer

A)  10.7% 
B)  11.8% 
C)  12.0% 
D)  12.2% 
A)  10.7% 
B)  11.8% 
C)  12.0% 
D)  12.2%

Question 7

A consumption bundle is affordable as long as

Accepted Answer

A)  It is a point that is on an indifference curve that is to the right of the budget line 
B)  It is a point that falls on the 45 degree line 
C)  The present discount value of the consumption stream is less than the present discount value of the income stream 
D)  The amount of the good consumed from year to year does not increase 
A)  It is a point that is on an indifference curve that is to the right of the budget line 
B)  It is a point that falls on the 45 degree line 
C)  The present discount value of the consumption stream is less than the present discount value of the income stream 
D)  The amount of the good consumed from year to year does not increase

Question 8

A bond's internal rate of return is also know as it's

Accepted Answer

A)  Coupon 
B)  Payback period 
C)  Duration 
D)  Yield to maturity 
A)  Coupon 
B)  Payback period 
C)  Duration 
D)  Yield to maturity

Question 9

-Table 10.1 shows the cash flows and discounted cash flows for three mutually exclusive projects available to a company.Assume an interest rate of 5%.Which project should the company choose if they want to recover their initial investment as soon as possible?

Accepted Answer

A)  Project A 
B)  Project B 
C)  Project C 
D)  Cannot be determined 
A)  Project A 
B)  Project B 
C)  Project C 
D)  Cannot be determined

Question 10

The current worth of a claim on future resources is called

Accepted Answer

A)  Net present value 
B)  Future value 
C)  Present discounted value 
D)  Internal rate of return 
A)  Net present value 
B)  Future value 
C)  Present discounted value 
D)  Internal rate of return

Question 11

A ______ is a legally binding promise to make specific future payments.

Accepted Answer

A)  Stock 
B)  Coupon 
C)  Bond 
D)  Deposit 
A)  Stock 
B)  Coupon 
C)  Bond 
D)  Deposit

Question 12

-Refer to Figure 10.1.Suppose the individual is initially at point b.Based on the figure,the individual is relatively ______ and will ultimately be a _____.

Accepted Answer

A)  Impatient; saver 
B)  Impatient; borrower 
C)  Patient; saver 
D)  Patient; borrower 
A)  Impatient; saver 
B)  Impatient; borrower 
C)  Patient; saver 
D)  Patient; borrower

Question 13

Which scenario has a higher present discounted value (assume interest is compounded annually); $100 owed in 3 years at 8% interest or $90 owed in 2 years at 7.25 % interest?

Accepted Answer

A)  $100 owed in 3 years 
B)  $90 owed in 2 years 
C)  Both scenarios have the same present discounted value 
D)  Cannot be determined with information provided 
A)  $100 owed in 3 years 
B)  $90 owed in 2 years 
C)  Both scenarios have the same present discounted value 
D)  Cannot be determined with information provided

Question 14

-Refer to Scenario 10.1.What is the net present value of the decision to go to invest in college?

Accepted Answer

A)  $10,742.71 
B)  $11,141.18 
C)  $11,655.84 
D)  $12,088.18 
A)  $10,742.71 
B)  $11,141.18 
C)  $11,655.84 
D)  $12,088.18

Question 15

-Refer to Figure 10.1.Which line represents saving?

Accepted Answer

A)  b 
B)  h 
C)  f + i 
D)  d 
A)  b 
B)  h 
C)  f + i 
D)  d

Question 16

The amount of money a lender requires for the use of funds is called

Accepted Answer

A)  Interest 
B)  Principal 
C)  Internal rate of return 
D)  Present discounted value 
A)  Interest 
B)  Principal 
C)  Internal rate of return 
D)  Present discounted value

Question 17

Which of the following are two main assumptions of The Life Cycle Hypothesis?

Accepted Answer

A)  People can earn in both the first and second stages of their life. People also prefer stability in their consumption patterns 
B)  People earn in the first stage of their life, but they don't earn in the second stage of their life. Interest rates are higher in the second period of a person's life than they are in the first period of a person's life 
C)  People earn in the first stage of their life, but they don't earn in the second stage of their life. People also prefer stability in their consumption patterns 
D)  People earn in the first stage of their life, but they don't earn in the second stage of their life. People are indifferent about the stability of their consumption patterns 
A)  People can earn in both the first and second stages of their life. People also prefer stability in their consumption patterns 
B)  People earn in the first stage of their life, but they don't earn in the second stage of their life. Interest rates are higher in the second period of a person's life than they are in the first period of a person's life 
C)  People earn in the first stage of their life, but they don't earn in the second stage of their life. People also prefer stability in their consumption patterns 
D)  People earn in the first stage of their life, but they don't earn in the second stage of their life. People are indifferent about the stability of their consumption patterns

Question 18

Which of the following is a way the government can stimulate saving?

Accepted Answer

A)  Decrease interest rates 
B)  Increase taxes 
C)  Offering tax incentives for retirement accounts 
D)  There is nothing the government can do to stimulate saving 
A)  Decrease interest rates 
B)  Increase taxes 
C)  Offering tax incentives for retirement accounts 
D)  There is nothing the government can do to stimulate saving

Question 19

Assume the interest rate is 5%.What is the present discounted value of a $1,000 bond that pays a $50 coupon each year for 10 years?

Accepted Answer

A)  $989.91 
B)  $999.91 
C)  $1,000.00 
D)  $1,009.99 
A)  $989.91 
B)  $999.91 
C)  $1,000.00 
D)  $1,009.99

Question 20

The rate of interest at which a project's NPV is exactly zero is called its

Accepted Answer

A)  Equilibrium rate 
B)  Internal rate of return 
C)  Break-even rate 
D)  Zero net rate 
A)  Equilibrium rate 
B)  Internal rate of return 
C)  Break-even rate 
D)  Zero net rate

When someone buys a bond,they give up the bond's price in exchange for

The difference between the present discount value of a revenue stream and the present discount value of a cost stream is called the

The difference between revenue and cost during a single year of a project's life is called the

Suppose you make a $5,000 investment that will return $3,000 in year 2 and another $3,500 in year 4.With an interest rate of 4.5%,what is the NPV of this project?

At an interest rate of 8.25% compounded annually,what is the present discounted value of $2000 to be received 2 years from now?

You have made an investment of $250 that will yield a profit of $30 in one year.If the interest rate is 11.5%,what is your internal rate of return?

A consumption bundle is affordable as long as

A bond's internal rate of return is also know as it's

-Table 10.1 shows the cash flows and discounted cash flows for three mutually exclusive projects available to a company.Assume an interest rate of 5%.Which project should the company choose if they want to recover their initial investment as soon as possible?

The current worth of a claim on future resources is called

A ______ is a legally binding promise to make specific future payments.

-Refer to Figure 10.1.Suppose the individual is initially at point b.Based on the figure,the individual is relatively __ and will ultimately be a _.

Which scenario has a higher present discounted value (assume interest is compounded annually); $100 owed in 3 years at 8% interest or $90 owed in 2 years at 7.25 % interest?

-Refer to Scenario 10.1.What is the net present value of the decision to go to invest in college?

-Refer to Figure 10.1.Which line represents saving?

The amount of money a lender requires for the use of funds is called

Which of the following are two main assumptions of The Life Cycle Hypothesis?

Which of the following is a way the government can stimulate saving?

Assume the interest rate is 5%.What is the present discounted value of a $1,000 bond that pays a $50 coupon each year for 10 years?

The rate of interest at which a project's NPV is exactly zero is called its

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Constraints, Choices, and Demand

Rom Demand to Welfare

Technology and Production

Cost

Rofit Maximization

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Externalities and Public Goods

Filters

Exam 10: Choices Involving Time

When someone buys a bond,they give up the bond's price in exchange for

The difference between the present discount value of a revenue stream and the present discount value of a cost stream is called the

The difference between revenue and cost during a single year of a project's life is called the

Suppose you make a $5,000 investment that will return $3,000 in year 2 and another $3,500 in year 4.With an interest rate of 4.5%,what is the NPV of this project?

At an interest rate of 8.25% compounded annually,what is the present discounted value of $2000 to be received 2 years from now?

You have made an investment of $250 that will yield a profit of $30 in one year.If the interest rate is 11.5%,what is your internal rate of return?

A consumption bundle is affordable as long as

A bond's internal rate of return is also know as it's

-Table 10.1 shows the cash flows and discounted cash flows for three mutually exclusive projects available to a company.Assume an interest rate of 5%.Which project should the company choose if they want to recover their initial investment as soon as possible?

The current worth of a claim on future resources is called

A ______ is a legally binding promise to make specific future payments.

-Refer to Figure 10.1.Suppose the individual is initially at point b.Based on the figure,the individual is relatively ______ and will ultimately be a _____.

Which scenario has a higher present discounted value (assume interest is compounded annually); $100 owed in 3 years at 8% interest or $90 owed in 2 years at 7.25 % interest?

-Refer to Scenario 10.1.What is the net present value of the decision to go to invest in college?

-Refer to Figure 10.1.Which line represents saving?

The amount of money a lender requires for the use of funds is called

Which of the following are two main assumptions of The Life Cycle Hypothesis?

Which of the following is a way the government can stimulate saving?

Assume the interest rate is 5%.What is the present discounted value of a $1,000 bond that pays a $50 coupon each year for 10 years?

The rate of interest at which a project's NPV is exactly zero is called its

Introduction

Supply and Demand3

Balancing Benefits and Costs

Principles and Preferences

Constraints, Choices, and Demand

Rom Demand to Welfare

Technology and Production

Cost

Rofit Maximization

Choices Involving Risk

Choices Involving Strategy

Behavioral Economics

Equilibrium and Efficiency

Market Intervention

General Equilibrium, Efficiency, and Equity

Monopoly

Pricing Policies

Oligopoly

Externalities and Public Goods

Filters

-Refer to Figure 10.1.Suppose the individual is initially at point b.Based on the figure,the individual is relatively __ and will ultimately be a _.