UGBA103samplemidterm1 - your name: _ your section - circle...

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warning – questions on both sides of this piece of paper !!! Midterm Exam #1,UGBA 103 Page 1 of 4 1. Short answer questions (straightforward, no tricks, and almost no calculation is needed) A. (true/false) In the U.S. today, $1 paid today is equal to $1 paid in two years: A) true false B. What is the present value of a payment of $2,490 received in year 7 if the B) correct, risk-adjusted discount rate is 10.41% per year ? C. (true/false) Both stocks and bonds can be valued by discounting expected C) true false future cashflows: D. (true/false) In the U.S. today, discount factors are sometimes greater than 1. D) true false E. If you invest $100 at an APR of 11% (with semi-annual compounding), how much will you have in 5 years ? E) F. (true/false) A growing perpetuity has a greater present value than a regular perpetuity if i) the discount rate and growth rate are positive; F) true false ii) the discount rate is greater than the growth rate; and iii) the cashflows are positive and equal at year 1. G. (true/false) The payback rule usually takes into account all future cashflows. G) true false H. What is the present value of receiving $17 every year, starting in one year, forever if the correct, risk-adjusted discount rate is 5% per year ? H) I. (true/false) We should include sunk costs in an NPV calculation if the cost are associated with the project in question. I)
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UGBA103samplemidterm1 - your name: _ your section - circle...

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