Exam 27: The Basic Tools of Finance

Figure 27-1.The figure shows a utility function. -Refer to Figure 27-1.Let 0A represent the distance between the origin and point A;let AB represent the distance between point A and point B;etc.Which of the following ratios best represents the marginal utility per dollar when wealth increases from $400 to $600? A) B) C) D)

What is the present value of a payment of $250 one year from today if the interest rate is 4 percent?

Figure 27-1.The figure shows a utility function. -Refer to Figure 27-1.The utility function that is shown exhibits the property of diminishing

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?

David increases the number of companies in which he holds stocks.

You have been promised a payment of $30,000 in the future.In which case is the present value of this payment highest?

HydroGrow is considering building a new greenhouse in which to grow tomatoes.The board meets and decides that this is the right thing to do.Before they can put their plans into action,the interest rate increases.The present value of the returns from this investment project

According to fundamental analysis,a saver should prefer to buy stocks that are

Which of the following concepts is most helpful in explaining why investment increases when the interest rate falls?

In general,as a person includes fewer stocks and more bonds in his portfolio,

Discuss the statistical evidence concerning the efficient markets hypothesis.

You are expecting to receive $750 at some time in the future.Which of the following would unambiguously increase the present value of this future payment?

Which of the following actions best illustrates adverse selection?

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?

Assuming the interest rate is 6 percent,which of the following has the greatest present value?

In effect,an annuity provides insurance

Which of the following is a source of market risk?

Diminishing marginal utility of wealth implies that the utility function is

Fundamental analysis shows that stock in Lodgefire Restaurants has a present value below its price.

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