second - Week 2, Chapter 3 questions 1,3,5,7 problems...

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Week 2, Chapter 3 – questions 1,3,5,7 problems 3,5,6,11 1.What makes an investment decision a good one? For the most part markets right now are based completely on emotion (people see the market sucking and the guy on the news talking about nothing but doom and gloom and that causes huge swings in the markets), rather than fundementals. Make sure you really understand what you are doing and have a set plan and stick too it (if you're buying and holding, don't panic and sell if the price plummets for a month). Even looking at the markets fundementally right now isn't an exact. 3.Why are market prices useful to a financial manager? Market price is just one of the number of ways to establish the monetary value of a good or a transaction. Shifts due to changing consumer preferences will inherently influence market price.Financial managers can evaluate based on quality/price ratio whether a good or a transaction are worthy of purchasing. 5.Can we directly compare dollar amounts received at different points in time? Yes, because the concept of present value reminds us that a dollar in the future is less valuable than a dollar today, and it gives us a way to compare sums of money at different points in time . The theory of risk management reminds us that the future is uncertain and risk-average people can take precautions to guard against this uncertainty. 7.If there is more than one project to take, how should the financial managers choose among them? It is simple. A good financial manager chooses an investment that is to maximize profit so he would choose the most profitable project(one with a positive net present value -NPV-). Problems 3. Suppose your employer offers you a choice between a $5000 bonus and 100 shares of the company’s stock. Whichever one you choose will be awarded today. The stock is currently trading for $63 per share. a. Suppose that if you receive the stock bonus, you are free to trade it. Which form
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second - Week 2, Chapter 3 questions 1,3,5,7 problems...

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