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Unformatted text preview: ECP 3703 OLD MC/TF EXAM QUESTIONS SPRING 2008 Jim Dewey 1 OLD MULTIPLE CHOICE EXAM QUESTIONS Questions are arranged by topics from the class outline. Questions are numbered in reference to the exam on which they appeared. The first number indicates the semester, 1 for Fall, 2 for Spring, 3 for Summer. The second indicates the exam. The third is the year. The fourth is the question number on the original exam. For example, 3.2.06.12 is Summer Exam 2 2006 question 12, and, 1.F.06.3 is Fall Final Exam 2006 question 3. There is a Key at the end of all questions. They key is in the order in which the questions appeared on the original exams, not in the order they appear in this document, in which they have been rearranged by topical area. *****WARNING***** In almost all cases, there is one right answer, and, it is the one indicated in the key. BUT, in the process of combining all of these questions, ordering them by topic, and cleaning up the formatting, etc it is possible that some error(s) slipped through. If you find a question for which you are convinced the key is wrong, please help us and your classmates out by asking about it on the discussion board. ECP 3703 OLD MC/TF EXAM QUESTIONS SPRING 2008 Jim Dewey 2 1. PRELIMINARY MATERIAL 3.1.06.1. Small Inc. is considering undertaking a project that will cost $200 today. There is a .4 probability that the project will fail in one year, losing $275 at that time. Otherwise, the project will return $847 in 2 years. If the discount rate is 10%, what is the expected present value of this project? A) 198 B) 250 C) 162 D) 120 E) none of the above 1.1.06.15. Billy Bobs Gadgets is a firm that will exist for 2 years only. At the end of the first year, profits will be $120 with probability .6 and -$15 otherwise. At the end of the second year, profits will be $175 with probability .8 and -$95 otherwise. The discount rate is 10%. What is the value of Billy Bobs firm? A) 166 B) 187 C) 200 D) 160 1.1.07.1. Jeremy must decide whether or not to acquire exclusive rights to produce rights to produce thingamajigs for 2 years. The purchase would cost him $100. The interest rate is 10%. Profits from thingamajig production will be received one year from purchase and then again two years from purchase. There is an 80% chance that thingamajig operating profits will be $77 next year, otherwise, they will be -$88. The second year, there is a 60% chance operating profits will be $242, otherwise they will be -$121. What is the expected present value of purchasing the rights to thingamajig production? A) -$16 B) $0 C) $20 D) $36 2. GAME THEORY TRUE FALSE 3.F.06.17. A simultaneous move game is one in which each player makes decisions without knowing what the other player does....
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- Spring '08