sample_test_questions

Sample_test_question - FinanceProfessor.com Bringing the real world to the classroom and vice versa Most Popular News Sources Web Questions Finance

Info iconThis preview shows pages 1–2. Sign up to view the full content.

View Full Document Right Arrow Icon
FinanceProfessor.com Bringing the real world to the classroom and vice versa! Web Questions 1. Your lease calls for payments of $500 a the end of each month for the next 12 months. Now your landlord offers you a new 1-year lease which calls for zero rent for 3 months, then rental payments of $700 at the end of each month for the next 9 months. You keep your money in a bank time deposit that pays a nominal annual rate of 5 percent. By what amount would your net worth change if you accept the new lease? a. -$509.81 b. -$253.62 c. $125.30 d. $253.62 e. $509.81 answer: b 1. A baseball player is offered a 5 year contract which pays him the following amounts: Year 1: 1.2 million Year 2: 1.6 million Year 3: 2.0 million Year 4: 2.4 million Year 5: 2.8 million Under the terms of the agreement all payments are made at the end of each year. Instead of accepting the contract, the baseball player asks his agent to negotiate contract which has a present value $1 million more than that which has been offered. Moreover, the player wants to receive his payments in the form of a 5 year annuity due. All cash flows are discounted at 10 percent. If the team were to agree to the players terms, what would be the player's annual salary (in millions of dollars)? a. $1.500 b. $1.659 c. $1.989 d. $2.343 Most Popular News Sources Finance Jobs Fun Links Islamic Finance Sign up for Finance Professor's free newsletter ! Note: We have been having difficulty with delivery via Bcentral (our main mail server). Therefore we have added two back-up mail providers for the newsletter. You can sign up through
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 2
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/01/2010 for the course FIN 535 taught by Professor Smith during the Spring '10 term at Drexel.

Page1 / 4

Sample_test_question - FinanceProfessor.com Bringing the real world to the classroom and vice versa Most Popular News Sources Web Questions Finance

This preview shows document pages 1 - 2. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online