Exam 14: The Basic Tools of Finance

Lucretia puts $400 into an account when the interest rate is 10 percent. Later she checks her balance and finds it's worth about $708.62. How many years did she wait to check her balance?

Demonstrate that whether you would prefer to have $225 today or wait five years for $300 depends on the interest rate. Show your work.

If the interest rate is 8 percent, then the present value of $1,000 to be received in 4 years is $735.03.

Suppose that fundamental analysis indicates a particular company's stock is overvalued.

You deposit $3,000 into an N-year certificate of deposit that pays 4.5 percent annual interest, and at the end of the N years you have $4,082.59. What is the number of years, N?

What is the present value of a payment of $100 one year from today if the interest rate is 5 percent?

Suppose the interest rate is 8 percent. Consider three payment options:Suppose the interest rate is 8 percent. Consider three payment options: 1. $200 today. 2) $220 one year from today. 3) $240 two years from today. Which of the following is correct?

Imagine that someone offers you $X today or $1,500 in 5 years. If the interest rate is 4 percent, then you would prefer to take the $X today if and only if

Figure 27-1. The figure shows a utility function. -Refer to Figure 27-1. Which distance along the vertical axis represents the marginal utility of an increase in wealth from $600 to $800?

Robert put $15,000 into an account with a fixed interest rate two years ago and now the account balance is $16,917.66. What rate of interest did Robert earn?

An increase in the interest rate causes a decrease in the future value of $1,000 that you have in a bank account today.

Hector puts $150 into an account when the interest rate is 4 percent. Later he checks his balance and finds he has about $168.73. How long did Hector wait to check his balance?

Write the formula for finding the future value in n years of $x today.

What is the present value of a payment of $200 to be made one year from today if the interest rate is 10 percent?

According to the efficient markets hypothesis, which of the following would decrease the price of stock in Veblen's Leisure Company?

Braden says that $400 saved for one year at 4 percent interest has a smaller future value than $400 saved for two years at 2 percent interest. Lefty says that the present value of $400 to be received one year from today if the interest rate is 4 percent exceeds the present value of $400 to be received two years from today if the interest rate is 2 percent.

Which of the following actions best illustrates moral hazard?

Using the rule of 70, about how much would $100 be worth after 50 years if the interest rate were 7 percent?

Clint puts $200 into an account when the interest rate is 8 percent. Later he checks his balance and finds that he has a balance of about $272.10. How many years did Clint wait to check his balance?

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