Question 1

In the market for money the price is called the

Accepted Answer

A) interest rate. 
B) wage rate. 
C) exchange rate. 
D) same as any other market, simply a "Price." 
A) interest rate. 
B) wage rate. 
C) exchange rate. 
D) same as any other market, simply a "Price."

Question 2

The percentage of a balance that a borrower must pay a lender is called the

Accepted Answer

A) inflation rate. 
B) usury rate. 
C) interest rate. 
D) monetary index. 
A) inflation rate. 
B) usury rate. 
C) interest rate. 
D) monetary index.

Question 3

Dividing the number seventy-two by an interest rate yields

Accepted Answer

A) the square root of seventy-two. 
B) the lowest common denominator of seventy-two. 
C) the real interest rate after seventy-two years. 
D) the Rule of 72. 
A) the square root of seventy-two. 
B) the lowest common denominator of seventy-two. 
C) the real interest rate after seventy-two years. 
D) the Rule of 72.

Question 4

Suppose you used the PV Excel function to determine whether an investment now would create enough profits in the future to be wise and it showed the PV to be $1 million This investment is

Accepted Answer

A) Wise 
B) Unwise 
C) Wise if you would have to invest less than $1 million to earn those profits and unwise otherwise. 
D) Wise if you would have to invest more than $1 million to earn those profits and unwise otherwise. 
A) Wise 
B) Unwise 
C) Wise if you would have to invest less than $1 million to earn those profits and unwise otherwise. 
D) Wise if you would have to invest more than $1 million to earn those profits and unwise otherwise.

Question 5

An increase in the interest rate will

Accepted Answer

A) increase the demand for money alone. 
B) decrease the demand for money and increase the supply of money. 
C) increase the demand for money and decrease the supply of money. 
D) change neither the demand nor the supply of money; rather it will only affect the quantity demanded and quantity supplied. 
A) increase the demand for money alone. 
B) decrease the demand for money and increase the supply of money. 
C) increase the demand for money and decrease the supply of money. 
D) change neither the demand nor the supply of money; rather it will only affect the quantity demanded and quantity supplied.

Question 6

Suppose you used the IRR Excel function to determine whether an investment now would create enough profits in the future to be wise and it showed the IRR to be 8%. This investment is

Accepted Answer

A) Wise at any interest rate 
B) Unwise at any interest rate 
C) Wise at interest rates above 8% and unwise at interest rates below 8% 
D) Wise at interest rates below 8% and unwise at interest rates above 8% 
A) Wise at any interest rate 
B) Unwise at any interest rate 
C) Wise at interest rates above 8% and unwise at interest rates below 8% 
D) Wise at interest rates below 8% and unwise at interest rates above 8%

Question 7

-Assuming that Figure 7.1 is a market for money that can be borrowed or saved, Box 1 is

Accepted Answer

A) "$" for the amount borrowed/saved. 
B) "$*" for the equilibrium amount borrowed/saved. 
C) "r" for interest rate. 
D) "r*" for equilibrium interest rate. 
A) "$" for the amount borrowed/saved. 
B) "$*" for the equilibrium amount borrowed/saved. 
C) "r" for interest rate. 
D) "r*" for equilibrium interest rate.

Question 8

Suppose your grandmother told you (today)that she had set aside an amount of money in a savings account bearing 3% interest that was sufficient to give you a $5,000 graduation present in exactly four years. How much would she have had to set aside?

Accepted Answer

A) $5000. 
B) $5000 x (1.03)4. 
C) $5000 / (1.03)4. 
D) $5000 / (1+.034). 
A) $5000. 
B) $5000 x (1.03)4. 
C) $5000 / (1.03)4. 
D) $5000 / (1+.034).

Question 9

-Assuming that Figure 7.1 is a market for money that can be borrowed or saved, Box 4 is

Accepted Answer

A) "$" for the amount borrowed/saved. 
B) "$*" for the equilibrium amount borrowed/saved. 
C) "r" for interest rate. 
D) "r*" for equilibrium interest rate. 
A) "$" for the amount borrowed/saved. 
B) "$*" for the equilibrium amount borrowed/saved. 
C) "r" for interest rate. 
D) "r*" for equilibrium interest rate.

Question 10

If the interest rate is positive, the present value of a stream of payments is

Accepted Answer

A) greater than the sum of the actual payments over time. 
B) less than the sum of the actual payments over time. 
C) equal to the sum of the actual payments over time. 
D) unrelated to the stream of actual payments over time. 
A) greater than the sum of the actual payments over time. 
B) less than the sum of the actual payments over time. 
C) equal to the sum of the actual payments over time. 
D) unrelated to the stream of actual payments over time.

Question 11

The interest rate at which the present value of costs equals the present value benefits is the

Accepted Answer

A) coupon interest rate. 
B) yield to maturity. 
C) internal rate of return. 
D) market interest rate 
A) coupon interest rate. 
B) yield to maturity. 
C) internal rate of return. 
D) market interest rate

Question 12

If the interest rate is 10%, at the end of two years the value of $100 invested now is

Accepted Answer

A) $100/1.1 
B) $100/1.12 
C) $120 
D) $121 
A) $100/1.1 
B) $100/1.12 
C) $120 
D) $121

Question 13

Suppose there is a decrease in the confidence that workers have in their future employment and income. This will cause

Accepted Answer

A) a decrease in borrowing which will decrease interest rates. 
B) a decrease in saving which will decrease interest rates. 
C) a decrease in borrowing which will increase interest rates. 
D) a decrease in saving which will increase interest rates. 
A) a decrease in borrowing which will decrease interest rates. 
B) a decrease in saving which will decrease interest rates. 
C) a decrease in borrowing which will increase interest rates. 
D) a decrease in saving which will increase interest rates.

Question 14

The advertised interest rate is the

Accepted Answer

A) nominal interest rate. 
B) real interest rate. 
C) expected rate of inflation. 
D) nominal interest rate minus the expected rate of inflation. 
A) nominal interest rate. 
B) real interest rate. 
C) expected rate of inflation. 
D) nominal interest rate minus the expected rate of inflation.

Question 15

Using an interest rate of 5%, which figure has the largest present value

Accepted Answer

A) $5000. 
B) $5050 to be received two years from now. 
C) $5075 to be received three years from now. 
D) $5500 to be received ten years from now. 
A) $5000. 
B) $5050 to be received two years from now. 
C) $5075 to be received three years from now. 
D) $5500 to be received ten years from now.

Question 16

If a person is going to borrow $30,000 for a car and pay it off in monthly payments of $713.70 for 5 years the internal rate of return is

Accepted Answer

A) 0%. 
B) 5%. 
C) 10%. 
D) 15%. 
A) 0%. 
B) 5%. 
C) 10%. 
D) 15%.

Question 17

If your broker tells you that a trust to which you are a beneficiary has changed and instead of getting $5000 per year starting next year you will be getting $4000 per year starting next year, the present value to you has

Accepted Answer

A) fallen. 
B) risen. 
C) remained unchanged. 
D) necessarily become more predictable. 
A) fallen. 
B) risen. 
C) remained unchanged. 
D) necessarily become more predictable.

Question 18

The form of risk to the investor associated with the asset unexpectedly falling in price is called

Accepted Answer

A) market risk. 
B) default risk. 
C) overall risk. 
D) complete risk. 
A) market risk. 
B) default risk. 
C) overall risk. 
D) complete risk.

Question 19

So long as the interest is greater than zero, the future value of any balance is

Accepted Answer

A) greater than the value itself. 
B) smaller than the value itself. 
C) equal to the value itself. 
D) either larger or smaller than the balance itself, depending upon the size of the positive interest rate. 
A) greater than the value itself. 
B) smaller than the value itself. 
C) equal to the value itself. 
D) either larger or smaller than the balance itself, depending upon the size of the positive interest rate.

Question 20

If you were going to evaluate the how much money you would need to pay on a loan, which Excel function would help you calculate it.

Accepted Answer

A) PMT 
B) Sum 
C) Profit 
D) Invest 
A) PMT 
B) Sum 
C) Profit 
D) Invest

Exam 7: Interest Rates and Present Value

In the market for money the price is called the

The percentage of a balance that a borrower must pay a lender is called the

Dividing the number seventy-two by an interest rate yields

Suppose you used the PV Excel function to determine whether an investment now would create enough profits in the future to be wise and it showed the PV to be $1 million This investment is

An increase in the interest rate will

Suppose you used the IRR Excel function to determine whether an investment now would create enough profits in the future to be wise and it showed the IRR to be 8%. This investment is

-Assuming that Figure 7.1 is a market for money that can be borrowed or saved, Box 1 is

Suppose your grandmother told you (today)that she had set aside an amount of money in a savings account bearing 3% interest that was sufficient to give you a $5,000 graduation present in exactly four years. How much would she have had to set aside?

-Assuming that Figure 7.1 is a market for money that can be borrowed or saved, Box 4 is

If the interest rate is positive, the present value of a stream of payments is

The interest rate at which the present value of costs equals the present value benefits is the

If the interest rate is 10%, at the end of two years the value of $100 invested now is

Suppose there is a decrease in the confidence that workers have in their future employment and income. This will cause

The advertised interest rate is the

Using an interest rate of 5%, which figure has the largest present value

If a person is going to borrow $30,000 for a car and pay it off in monthly payments of $713.70 for 5 years the internal rate of return is

If your broker tells you that a trust to which you are a beneficiary has changed and instead of getting $5000 per year starting next year you will be getting $4000 per year starting next year, the present value to you has

The form of risk to the investor associated with the asset unexpectedly falling in price is called

So long as the interest is greater than zero, the future value of any balance is

If you were going to evaluate the how much money you would need to pay on a loan, which Excel function would help you calculate it.

Economics: the Study of Opportunity Cost

Supply and Demand

The Concept of Elasticity and Consumer and Producer Surplus

Firm Production, Cost, and Revenue

Perfect Competition, Monopoly, and Economic Versus Normal Profit

Every Macroeconomic Word You Ever Heard: Gross Domestic Product, Inflation, Unemployment, Recession, Depression

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Policy

Federal Spending

Federal Deficits, Surpluses, and the National Debt

The Housing Bubble

The Recession of 2007-2009: Causes and Policy Responses

Is Economic Stagnation the New Normal

Is the Fiscalsky Falling: An Examination of Unfunded Social Security, Medicare, and State and Local Pension Liabilities

International Trade: Does It Jeopardize American Jobs

International Finance and Exchange Rates

The European Debt Crisis

Economic Growth and Development

Nafta, Gatt, Wto: Are Trade Agreements Good for Us

The Line Between Legal and Illegal Goods

Natural Resources, the Environment, and Climate Change

Health Care

Government-Provided Health Insurance: Medicaid, Medicare, and the Child Health Insurance Program

The Economics of Prescription Drugs

So You Want to Be a Lawyer: Economics and the Law

The Economics of Crime

Antitrust

The Economics of Race and Discrimination

Income and Wealth Inequality

Farm Policy

Minimum Wage

Ticket Brokers and Ticket Scalping

Rent Control

Economics of K-12 Education

Economics of College and University Education

Poverty and Welfare

Head Start

Social Security

Personal Income Taxes

Energy Prices

If We Build It, Will They Come and Other Sports Questions

The Stock Market Crashes

Unions

Walmart: Always Low Prices and Low Wages- Always

The Economic Impact of Casino Gambling

The Economics of Terrorism

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