Ch15 - CHAPTER 15 Investment Time and Capital Markets...

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CHAPTER 15 Investment, Time and Capital Markets MULTIPLE CHOICE Section 15.1 easy 1. The marginal revenue product of input purchase is not a complete picture in the case of capital, because capital is a. money. b. not an input. c. an output as well as an input. d. durable. e. all of the above. easy 2. Which of the following questions is addressed when hiring capital, but not addressed when hiring labor? a. How much are future profits worth today? b. How much are today's profits worth in the future? c. How much are the future's profits worth in the future? d. How much are today's profits worth today? e. All questions present when capital is purchased are present when labor is purchased. easy 3. Which is a stock variable? a. Labor b. Profit c. Income d. Capital e. Price easy 4. If a firm can earn a profit stream of $50,000 per year for 10 years, that profit stream is worth a. more than $500,000 today. b. $500,000 today. c. less than $500,000 today, but a positive amount. d. nothing today e. some amount, but whether it is more, less or the same as $500,000 cannot be determined. Section 15.2 easy 5. The present value formula makes it apparent that: a. a decline in the interest rate will cause a decision maker to weigh recent period returns relatively more heavily than before the decline. b. an increase in the interest rate will cause a decision maker to weigh distant (or future) returns relatively more heavily than before the increase. c. the present value of a fixed sum decreases as the time until it is to be paid increases. d. all of the above. e. both (a) and (c). 18
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CHAPTER 15 TEST BANK INVESTMENT, TIME AND CAPITAL MARKETS SIXTH EDITION easy 6. If the interest rate is 5%, in one period the value of $1 today is a. $1.20. b. $1.05. c. 95 cents. d. 20 cents. e. 5 cents. easy 7. If the interest rate is 10%, the present value of $1 next year is a. $1.20. b. $1.10 c. 91 cents. d. 10 cents. e. 9 cents. moderate 8. You have won a contest and are allowed to choose between two prizes. One option is to receive $200 today and another $200 one year from now. The second option is $100 today and an additional $325 one year from now. At what interest rate (if any) is the present value of the two prizes identical? a. 0 percent b. 5 percent c. 10 percent d. 25 percent e. none of the above moderate 9. When the interest rate is R the formula for finding the value of a current amount $M one year from now is a. M (1 + R/100). b. M (1 + R). c. M / (1 + R). d. M / R. e. M / (100R). moderate 10. The formula for finding the present value of an amount M that will be received one year from now, when the interest rate is R, is a. M x (1 + R/100). b. M x (1 + R). c. M / (1 + R). d. M / R. e.
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This note was uploaded on 08/07/2011 for the course ECON 105 taught by Professor Prof.eco during the Spring '11 term at Indian School of Business.

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Ch15 - CHAPTER 15 Investment Time and Capital Markets...

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