Question 1

A higher interest rate

Accepted Answer

A) increases the motivation to delay consumption and, therefore, save. 
B) increases the motivation to delay consumption and, therefore, borrow. 
C) decreases the motivation to delay consumption and, therefore, save. 
D) decreases the motivation to delay consumption and, therefore, borrow. 
A) increases the motivation to delay consumption and, therefore, save. 
B) increases the motivation to delay consumption and, therefore, borrow. 
C) decreases the motivation to delay consumption and, therefore, save. 
D) decreases the motivation to delay consumption and, therefore, borrow.

Question 2

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

Accepted Answer

A) $100/1.1. 
B) $100/.1. 
C) $100/10. 
D) $110. 
A) $100/1.1. 
B) $100/.1. 
C) $100/10. 
D) $110.

Question 3

The notion of interest sensitive consumption would be most readily observed when people buy

Accepted Answer

A) furniture. 
B) food. 
C) insurance. 
D) health care. 
A) furniture. 
B) food. 
C) insurance. 
D) health care.

Question 4

Suppose you used the FV Excel function to determine whether your rate of saving will be sufficient to purchase the $1 million item you want ten years from now. Your savings rate is

Accepted Answer

A) Just right 
B) Too low 
C) Too high if the FV calculation yields a number less than $1 million and too low otherwise. 
D) Too high if the FV calculation yields a number more than $1 million and too low otherwise. 
A) Just right 
B) Too low 
C) Too high if the FV calculation yields a number less than $1 million and too low otherwise. 
D) Too high if the FV calculation yields a number more than $1 million and too low otherwise.

Question 5

To determine whether an investment makes sense a business will compute the net present value and if the result is

Accepted Answer

A) negative they will make the investment. 
B) positive they will make the investment. 
C) positive they will not make the investment unless the interest rate rises. 
D) positive they will not make the investment regardless of the change in interest rates. 
A) negative they will make the investment. 
B) positive they will make the investment. 
C) positive they will not make the investment unless the interest rate rises. 
D) positive they will not make the investment regardless of the change in interest rates.

Question 6

An increase in the confidence that car-buying consumers have in their future income will

Accepted Answer

A) increase the demand for borrowable money. 
B) decrease the demand for borrowable money. 
C) increase the supply of borrowable money. 
D) decrease the supply of borrowable money. 
A) increase the demand for borrowable money. 
B) decrease the demand for borrowable money. 
C) increase the supply of borrowable money. 
D) decrease the supply of borrowable money.

Question 7

If your grandmother gives you a high school graduation gift of $5,000 and you do not spend the gift, but invest it to earn an interest rate of 6% per year compounded annually, upon your graduation from college after exactly four years your gift will be worth approximately

Accepted Answer

A) $5000. 
B) $5789. 
C) $6312. 
D) $9327. 
A) $5000. 
B) $5789. 
C) $6312. 
D) $9327.

Question 8

If a person is going to borrow $360,000 for a home and pay it off in monthly payments of $1,932.56 for 30 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 9

The notion of interest sensitive consumption would be most readily observed when people buy

Accepted Answer

A) cars. 
B) food. 
C) insurance. 
D) higher education. 
A) cars. 
B) food. 
C) insurance. 
D) higher education.

Question 10

If you were going to evaluate the how much money you have after ten years of saving $100 per month, which Excel function would help you calculate it.

Accepted Answer

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

Question 11

Using the Rule of 72, how long will it take something growing at 3% per year to double

Accepted Answer

A) 100 years. 
B) 72 years. 
C) 24 years. 
D) 216 years. 
A) 100 years. 
B) 72 years. 
C) 24 years. 
D) 216 years.

Question 12

If you were going to evaluate the wisdom of an investment made now that created a stream of profits in the future, which Excel function would help you calculate it.

Accepted Answer

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

Question 13

In the market for money the behavior of savers is represented by the

Accepted Answer

A) demand curve. 
B) supply curve. 
C) neither the supply curve nor the demand curve. 
D) a combination of the supply and demand curves. 
A) demand curve. 
B) supply curve. 
C) neither the supply curve nor the demand curve. 
D) a combination of the supply and demand curves.

Question 14

If your grandmother gives you $5,000 and you don't spend it, but invest it to earn 8% per year compounded annually, it will be worth $10,000 at the end of

Accepted Answer

A) 72 years. 
B) 10 years. 
C) 9 years. 
D) 8 years. 
A) 72 years. 
B) 10 years. 
C) 9 years. 
D) 8 years.

Question 15

If an investment requires payment of $10,000 now and promises to return a single payout of $15,000 one year from now, the net present value of the investment at an interest rate of 12% is approximately

Accepted Answer

A) $3,393. 
B) $5,000. 
C) $10,000. 
D) $13,393. 
A) $3,393. 
B) $5,000. 
C) $10,000. 
D) $13,393.

Question 16

If the interest rate is 10%, the present value of $100 to be paid next year is

Accepted Answer

A) $100/1.1. 
B) $100/.1. 
C) $100/10. 
D) $110. 
A) $100/1.1. 
B) $100/.1. 
C) $100/10. 
D) $110.

Question 17

Using the Rule of 72, how long will it take something growing at 6% per year to double

Accepted Answer

A) 100 years. 
B) 72 years. 
C) 12 years. 
D) 432 years. 
A) 100 years. 
B) 72 years. 
C) 12 years. 
D) 432 years.

Question 18

If an investment requires payment of $5,000 now and promises to return a single payout of $15,000 one year from now, the net present value of the investment at an interest rate of 10% is approximately

Accepted Answer

A) $3,636. 
B) $8,636. 
C) $10,000. 
D) $13,636. 
A) $3,636. 
B) $8,636. 
C) $10,000. 
D) $13,636.

Question 19

If an investment (where the costs are incurred before then profits)makes sense when the interest rate on the borrowed money to pay for it is 10%

Accepted Answer

A) an increase in the interest rate will cause the investment to lose money. 
B) an increase in the interest rate will cause the investment to be more profitable. 
C) a decrease in the interest rate will cause the investment to make even more money. 
D) a decrease in the interest rate will cause the investment to be less profitable, but it still may make money. 
A) an increase in the interest rate will cause the investment to lose money. 
B) an increase in the interest rate will cause the investment to be more profitable. 
C) a decrease in the interest rate will cause the investment to make even more money. 
D) a decrease in the interest rate will cause the investment to be less profitable, but it still may make money.

Question 20

If a person is going to borrow $360,000 for a home and pay it off in monthly payments of $4,552.00 for 30 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%.

Exam 7: Interest Rates and Present Value

A higher interest rate

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

The notion of interest sensitive consumption would be most readily observed when people buy

Suppose you used the FV Excel function to determine whether your rate of saving will be sufficient to purchase the $1 million item you want ten years from now. Your savings rate is

To determine whether an investment makes sense a business will compute the net present value and if the result is

An increase in the confidence that car-buying consumers have in their future income will

If your grandmother gives you a high school graduation gift of $5,000 and you do not spend the gift, but invest it to earn an interest rate of 6% per year compounded annually, upon your graduation from college after exactly four years your gift will be worth approximately

If a person is going to borrow $360,000 for a home and pay it off in monthly payments of $1,932.56 for 30 years the internal rate of return is

The notion of interest sensitive consumption would be most readily observed when people buy

If you were going to evaluate the how much money you have after ten years of saving $100 per month, which Excel function would help you calculate it.

Using the Rule of 72, how long will it take something growing at 3% per year to double

If you were going to evaluate the wisdom of an investment made now that created a stream of profits in the future, which Excel function would help you calculate it.

In the market for money the behavior of savers is represented by the

If your grandmother gives you $5,000 and you don't spend it, but invest it to earn 8% per year compounded annually, it will be worth $10,000 at the end of

If an investment requires payment of $10,000 now and promises to return a single payout of $15,000 one year from now, the net present value of the investment at an interest rate of 12% is approximately

If the interest rate is 10%, the present value of $100 to be paid next year is

Using the Rule of 72, how long will it take something growing at 6% per year to double

If an investment requires payment of $5,000 now and promises to return a single payout of $15,000 one year from now, the net present value of the investment at an interest rate of 10% is approximately

If an investment (where the costs are incurred before then profits)makes sense when the interest rate on the borrowed money to pay for it is 10%

If a person is going to borrow $360,000 for a home and pay it off in monthly payments of $4,552.00 for 30 years the internal rate of return is

Economics: the Study of Opportunity Cost

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Perfect Competition, Monopoly, and Economic Versus Normal Profit

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

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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

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Income and Wealth Inequality

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Minimum Wage

Ticket Brokers and Ticket Scalping

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Poverty and Welfare

Head Start

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Personal Income Taxes

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