Exam 27: The Basic Tools of Finance

Amanda talks with several different brokers at a social gathering.She hears the following advice from brokers A,B,and C.Which broker,if any,gave her incorrect advice?

Nobel Prize winner Daniel Kahaneman suggests an investment strategy that involves

Two years ago Brian put some money into an account.He earned 6 percent interest on this account and now has about $1,000.About how much did he deposit into his account two years ago?

Which of the following is not correct?

Which of the following is correct concerning diversification?

You are tearing down a building and find $1 in change that someone lost when working on the building 140 years ago.If instead of being careless with their change,this person had deposited their $1 in a bank and earned 2 percent interest,how much would be in the account today according to the rule of 70?

Suppose that the interest rate is 5 percent.Consider three payment options: 1.$500 today. 2)$520 one year from today. 3)$550 two years from today. Which of the following is correct?

Figure 27-1 -Refer to Figure 27-1.Which of the graphs above is consistent with positive but diminishing marginal utility?

Which of the following is correct?

A risk averse person has

According to fundamental analysis,when choosing stocks for your portfolio,you should prefer undervalued stocks.

Some people claim that stocks follow a random walk.What does this mean?

Suppose that the interest rate is 7 percent.Consider four payment options: Option A: $500 today. Option B: $550 one year from today. Option C: $575 two years from today. Option D: $600 three years from today. Which of the payments has the highest present value today?

What is the future value of $750 one year from today if the interest rate is 3 percent?

Diminishing marginal utility of wealth implies that the utility function is

Risk-averse persons will take no risks.

Fundamental analysis is

The future value of a deposit in a savings account will be larger

Fourteen years ago Alfred put money in his account at First National Bank.Alfred decides to cash in his account and is told that his money has quadrupled.According to the rule of 70,what rate of interest did Alfred earn?

The K-Nine dog food company is considering the purchase of additional canning equipment.They expect that adding the equipment will yield $200,000 at the end of the first year and $250,000 at the end of the second year and then nothing after that.At which of the following prices and interest rates would K-Nine buy the equipment?