Exam 14: Capital and Financial Markets

With one year of study,Rob Sanchez can earn a master's degree,which will cost him $15,000 in tuition and $20,000 in lost wages.The degree will increase his yearly income by $20,000 per year for three years after receiving the degree.The interest rate is 10 percent (0.10)per year.What should Rob do? (Assume that costs are incurred and income is received at the end of the year. )

Which of the following changes would increase the present value of a future payment?

Which of the following types of bond typically has the highest yields? (The letters are Moody's ratings. )

You are thinking of buying a newly issued,5-year bond that has a face value of $10,000 and offers no annual coupon payments.What is the most you should pay for this bond,if the interest rate is 5 percent (0.05)per year?

The table below describes a lawn mowing company's revenues from different numbers of lawn mowers.If the price of a lawn mower is $2,000,how many mowers should the company buy?

The table below shows the total present value of additional revenue from DVD players at Video Wizard,a business that rents audiovisual equipment.If the price of a DVD player is $450,what will be Video Wizard's total investment expenditure on cash registers?

You just won the lottery.You have a choice of three different prize options. Option #1: receive $1,200 immediately Option #2: receive $1,500 a year from now Option #3: receive $5,000 five years from now. If the interest rate is 10% the ranking of the options,from the lowest present value to the highest is

Your aunt gives you a PepsiCo bond with face value of $5,000.It will mature in two years.Currently,the interest rate is 10 percent (0.10)per year.How will the value of the bond change if the interest rate falls to 5 percent tomorrow morning?

Travel Expert is a corporation that specializes in selling vacation packages in Transylvania and Stansylvania.There are a fixed number of shares of Travel Expert's stock available to the public.If the two countries go to war,making it much more dangerous to travel there,what will most likely happen to the Travel Expert's share price and the number of shares outstanding?

Other things equal,an increase in the interest rate will

You just won the lottery.You have a choice of three different prize options. Option #1: receive $1,200 immediately; Option #2: receive $1,500 a year from now; Option #3: receive $1,800 five years from now. If the interest rate is 15% the ranking of the options,from the lowest present value to the highest is

A firm's choice about how much physical capital to employ differs from its choice of how much labor to employ because

The table below shows the total number of loaves of bread a bakery can bake per year with different numbers of ovens.The market for bread is perfectly competitive,with a market price of $2 per loaf.What is the marginal revenue product of the third oven?

Which of the following would increase the value of a firm's stock?

The fact that the supply curve for a given firm's bond is vertical reflects the fact that

Which of the following factors would not be considered by a technical analyst when predicting a firm's stock price?

Which of the following would increase the price of a firm's stock?

Suppose the Dow Jones Industrial Average has risen for three days in a row.According to the efficient markets theory of stock prices,

The supply curve for a particular bond is horizontal.

A new computer will generate $1,000 in net revenue for a firm during its first year,$500 during its second year,$250 during its third year,and nothing thereafter.If the interest rate is 10 percent (0.10)per year,what is the present value of the computer to the firm? (The first payment will be received at the end of this year. )