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1. If the interest rate is 5%, what is the present value of ten dollars received one year from now?
A. $9.50.
B. $10.05.
C. $9.52.
D. $9.77.
Ans. C
2. When dealing with present value, a higher interest rate:
A. does not affect the present value of the future amount.
B. increases the present value of a future amount.
C. decreases the present value of a future amount.
D. none of the statements associated with this question are correct.
Ans. C
3. Maximizing the lifetime value of the firm is equivalent to maximizing the firm's current profits if the
A. interest rate is larger than the growth rate in profits and both are constant.
B. growth rate in profits is constant and is larger than the interest rate.
C. interest rate is smaller than the growth rate of profits.
D. growth rate of profits and the interest rate are equal.
Ans. A
4. Suppose the growth rate of the firm's profit is 3%, the interest rate is 7%, and the current profits of
the firm are 150 million dollars: What is the value of the firm?
Ans. 4,012.5m
5. In a competitive market, the market demand is Q
d
= 60  6P and the market supply is Q
s
= 4P. A price
ceiling of $3 will result in a
A. shortage of 30 units.
B. shortage of 15 units.
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 Spring '11
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