AFM 121, Winter 2012
Annuity and Perpetuity Practice Problems
Problem 1 (Easy)
Large jackpots in most U.S. lotteries are paid out in equal annual installments. The winner can also
request immediate payment, but in this case the jackpot is reduced and only
AFM 273 - Quiz #2
Multiple Choice Questions: Place an "X" in the shaded cell next to the correct answer. (1 mark each)
Answer the questions on all "3" tabs.
CPI is an indicator of _
Economies of Scale
Figure 14-1 above represents the six steps in setting price. Which letter represents the step where a firm
would consider a demand-, cost-, profit-, or competition-oriented approach?
Figure 14-1 above r
Nike and Dell stock returns
Suppose all possible investment opportunities in the world are limited to the five stocks listed in the table
below. What does the market
145.Tendollars.com offers thousands of gifts, all priced at $10. This is an example of two pricing methods
working in tandem. Most likely, the firm uses a _ and a _.
A. customary pricing approach; skimming pricing approach
B. odd-even pricing approach; lo
Royal Mount Games would like to invest in a division to develop software for video games. To evaluate this decision, the firm
first attempts to project the wo
Problem 13-26, 13-27, 13-28
Assume that the CAPM is a good description of stock price returns. The market expected return is 7% with 10% volatility and the riskfree ra
Which do you prefer: a bank account that pays 5% per year (EAR) for
three years or
a. An acco
184.Which of the following statements regarding quantity discounts is most accurate?
A Cumulative quantity discounts encourage repeat buying by a single customer to a far greater degree
. than do noncumulative quantity discounts.
B Noncumulative quantity
The following table summarizes prices of various default-free zero-coupon
bonds (expressed as a percentage of face value):
Price (per $100 fa
93. Rather than billing clients by the hour, some lawyers and their clients agree on a fixed fee based on
expected costs plus an agreed upon level of profit for the law firm. Which pricing approach are they
A. target pricing
B. cost-plus pricing
120.Target return-on-investment (ROI) is frequently used by
B. public utilities.
C. business-to-business markets.
E. small privately owned firms.
121.Rather than emphasize demand, cost, or profit factors, a price setter ca
106.The retail price of DVD players has decreased from $900 in the mid-1990s to less than $100 today. This
is due in large part to
A. skimming pricing.
B. prestige pricing.
C. odd-even pricing.
D. experience curve pricing.
E. customary pricing.
113.The manager of a small gasoline station observes that while gasoline sales have been steady, the service
side of the business has fallen off, and mechanics are often idle. He decides to offer a promotiona $20
off coupon for an oil change that is to be
100.The Brazilian government wants to build a global positioning satellite (GPS) system. The satellite
manufacturer will receive a mutually agreed upon profit. The pricing approach the satellite manufacturer
uses is called
A. standard markup pricing.
126.For most products, it is difficult to identify a specific market price for a product or product class. Still,
marketing managers often have a subjective feel for the competitors' price or market price. Using this
benchmark, they then may deliberately
137.Position "C" in Figure 14-3 above represents the price premium of which of the following?
A. Crunch n Munch
B. Cracker Jack
C. Fiddle Faddle
D. Private Brands
E. Seasonal, specialty, and regional brands
138.Position "D" in Figure 14-3 above represents
152.Yield management pricing is a form of
A. target pricing.
B. loss-leader pricing.
C. dynamic pricing.
D. customary pricing.
E. price lining.
153.Which of the following statements regarding new car purchases in the United States is most accurate?
159.When establishing product line pricing, the lowest-priced item is typically positioned as
A. the youngest product item in the line.
B. the smallest selling product item in the line.
C. the lost-cost item in the line in terms of quality and features.
178.Mike Morgan, a sales representative for a major distributor of Kodak film, wanted to encourage repeat
purchases by his customers. In order to accomplish this objective, Morgan offered the following
discounts to his customers: a 10 percent discount for
132.Using _, many retailers deliberately sell products below their normal prices (and sometimes
below cost) to attract attention and induce additional store traffic.
A. customary pricing
B. below-market pricing
C. loss-leader pricing
D. prestige pricing
59. Odd-even pricing is based on
A. retailers' perceptions of price.
B. customers' perceptions of price.
C. wholesalers' markups.
D. manufacturers' perceptions of price.
E. government regulators' perceptions of price.
60. The prices for all furniture sold
87. Creative Quilts Studio sells hundreds of colors and types of fabric and thread. To price its inventory, the
owners add 50 percent to the cost of each bolt of fabric and every spool of thread. What is this pricing
A. target return-on-s
Part I: Forecasting Net
To determine a companys financing
needs, we need to forecast the companys
Free Cash Flow (FCF)
If FCF is negative then the company needs to
raise capital by borrowing or issuing equity
If FCF is p
Vizio's long-term goal for the next 20 to 30 years is to
A. have at least one of its HDTVs products in every single home in the United States.
B. have its HDTVs exported from the U.S. to China.
C. be the next Sony.
D. be the next Apple.
20. A skimming pricing policy is likely to be most effective when
A. customers are willing to buy immediately at the high initial price.
B. consumers tend to be price sensitive.
C. it will be easier to set measurable sales unit goals.
D. a lower price wil
13. Skimming pricing is a strategy that introduces a new or innovative product by
A. following a price elastic strategy.
B. creating multiple price points.
C. setting a high initial price.
D. setting a low initial price.
E. setting the price at the averag
26. The pricing strategy that is almost the exact opposite of skimming pricing is
A. target pricing.
B. penetration pricing.
C. price lining.
D. odd-even pricing.
E. prestige pricing.
27. Wrigley recently introduced a new flavor of Orbit brand sugar free