Exam 27: The Basic Tools of Finance

Four years ago Matt deposited some money into an account.He earned 5 percent on this account and now has a balance of about $303.88.How much did he deposit into his account when he opened it?

Which of the following is not consistent with the efficient market hypothesis?

A person with diminishing marginal utility of wealth is risk averse.

If a person is risk averse,then she has

A company that can build a project that will cost $50,000,but returns $52,000 in one year would make a good decision turning this project down if the interest rate were 3 percent.

At an annual interest rate of 20 percent,about how many years will it take $100 to double in value?

Which of the flowing is correct?

A firm has four different investment options.Option A will give the firm $10 million at the end of one year,$10 million at the end of two years,and $10 million at the end of three years.Option B will give the firm $5 million at the end of one year,$10 million at the end of two years,and $15 million at the end of three years.Option C will give the firm $15 million at the end of one year,$10 million at the end of two years,and $5 million at the end of three years.Option D will give the firm $21 million at the end of one year,nothing at the end of two years,and $9 million at the end of three years.Which of these options has the highest present value if the rate of interest is 5 percent?

Which of the following is correct if the interest rate is 6 percent?

The present value of any future sum of money is the amount that would be needed today,at current interest rates,to produce that future sum.

At which interest rate is the present value of $183.60 two years from today equal to about $173.06 today?

An increase in the number of corporations in a portfolio from 1 to 10 reduces

Which of the following is not correct?

The future value of $1 saved today is $1/(1 + r).

George has almost $300 in his account.Some years ago he put $213.20 into his account that promised to pay 5 percent interest.How many years ago did he open his account?

Roger determines that if Aim Corporation has high revenues,then Zest Corporation will have low revenues,and that if Aim Corporation has low revenues,Zest Corporation will have high revenues.He buys stock in both corporations.

The sooner a payment is received and the higher the interest rate,the greater the present value of a future payment.

Eddie is risk averse.Which of the following is correct about Eddie?

Your accountant tells you that if you can continue to earn the current interest rate on your balance of $500 for ten years,you will have about $983.58.If your accountant is correct,what is the current rate of interest?

Jamie deposited $1,000 into an account two years ago.The first year she earned 5 percent interest,the second she earned 6 percent.How much money does she have in her account today?