hw8
Multiple Choice
Identify the choice that best completes the statement or answers the question.
1. The field of finance primarily studies
a. how society manages its scarce resources.
b. the implications of time and risk for allocating resources over time.
c. firms decisions concerning how much to produce and what price to charge.
d. how society can reduce market risk.
2. Which of the following is the correct way to figure the future value of $1 put in an account that earns 5
percent for 20 years?
a. $1(1 + .05)
20
b. $1(1 + .05
20)
20
c. $1(1 + .05
20)
d. $1(1 + 20/.05)
20
3. The future value of a deposit in a savings account will be larger
a. the longer a person waits to withdraw the funds.
b. the higher the interest rate is.
c. the larger the initial deposit is.
d. All of the above are correct.
4. What is the future value of $500 one year from today if the interest rate is 6 percent?
a. $503
b. $515
c. $530
d. None of the above is correct.
5. At an annual interest rate of 10 percent, about how many years will it take $100 to double in value?
a. 5
b. 7
c. 9
d. 11
6. At an annual interest rate of 10 percent, about how many years will it take $100 to triple in value?
a. 8
b. 10
c. 12
d. 14
7. Jamie deposited $1,000 into an account two years ago. The first year she earned 5 percent interest, the second
she earned 6 percent. How much money does she have in her account today?
a. $1111.11
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View Full Documentb. $1113.00
c. $1131.33
d. None of the above are correct to the nearest penny.
8. Suppose that the price of a bond is equal to the sum of the present value of its future payments. Suppose
further that this bond pays $50 in one year and $1,050 in two years. What is the price of the bond if the
interest rate is 5 percent?
a. $1,050.00
b. $1,045.35
c. $1,000.00
d. $945.35
9. On May 25, 1975 three pals graduated from high school, pooled together $1000 and put the money into an
account promising to pay 8% for the next 30 years. On May 25, 2005 they withdrew the money? To the
nearest dollar, how much did they withdraw?
a. $2,400
b. $10,063
c. $32,400
d. None of the above are correct to the nearest dollar.
10. Which of the following is the correct expression for finding the present value of a $1,000 payment one year
from today if the interest rate is 6 percent?
a. $1,000
(1.06)
b. $1,000
(1.06)
c. $1,000/(1.06)
d. None of the above is correct.
11. A scholarship gives you $1,000 today and promises to pay you $1,000 one year from today. What is the
present value of these payments?
a. $2,000/(1 +
r
)
2
.
b. $1,000 + $1,000/(1 +
r
)
c. $1,000/(1 +
r
) + $1,000/(1 +
r
)
2
d. $1,000(1 +
r
) + $1,000(1 +
r
)
2
12. Which of the following changes would increase the present value of a future payment?
a. an increase in the size of the payment
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 Spring '08
 sheflin
 Macroeconomics, Time Value Of Money

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