Exam 14: The Basic Tools of Finance

Figure 14-2. The figure shows a utility function for Mary Ann. -Refer to Figure 14-2. Suppose Mary Ann begins with $1,050 in wealth. Which of the following coin-flip bets would she definitely not be willing to accept?

If you are faced with the choice of receiving $500 today or $800 6 years from today, you will be indifferent between the two possibilities if the interest rate is 8.148 percent.

Which famous person referred to compounding as "the greatest mathematical discovery of all time?"

Which of the following is not correct?

Discuss the statistical evidence concerning the efficient markets hypothesis.

Imagine that someone offers you $100 today or $200 in 10 years. You would prefer to take the $100 today if the interest rate is

Which of the following has a present value of $100?

If your research leads you to believe that the present value of a stock's dividend stream and future price is less than its price then you believe the stock is

A firm has three 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 $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 C will give the firm $30 million at the end of one year, and nothing thereafter. Which of these options has the highest present value?

If a person had increasing marginal utility, then the decline in utility from losing $1,000 would be greater than the increase in utility from gaining $1,000.

Marcia has four savings accounts. Which account has the largest balance?

The You Look Marvelous! cosmetic company is considering building a new shampoo factory. Its accountants and board of directors meet and decide that it is not a good idea to build the factory. If interest rates fall after the meeting

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

Economists have developed models of risk aversion using the concept of

The present value of $100 to be paid in two years is less than the present value of $100 to be paid in three years.

Felix deposited $500 into an account two years ago. The first year he earned 3 percent interest and the second year he earned 5 percent interest. How much money does Felix have in his account now?

Which of the following games might a risk-averse person play?

The field of finance primarily studies

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