UGBA103samplemidterm1

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

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)

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

View Full Document
This is the end of the preview. Sign up to access the rest of the document.

{[ snackBarMessage ]}