Chapter14e

If you put $300 in an account paying 2 percent interest, what is the future value of this account in two years?

• 310
• 312
• $312.12
• $314.24

What is the future value of $500 one year from today if the interest rate is 6 percent?

• 503
• 515
• 530
• None of the above are correct.

What is the future value of $750 one year from today if the interest rate is 3 percent?

• 772.73
• 772.50
• 773.33
• None of the above are correct to the nearest penny.

What is the future value of $800 one year from today if the interest rate is 7 percent?

• $747.66
• $756.00
• $856.00
• None of the above are correct to the nearest penny.

What is the future value of $333 at an interest rate of 3 percent one year from today?

• $337.39
• $342.99
• $343.09
• None of the above are correct to the nearest penny.

The present value of a payment to be made in the future is lower at

• higher interest rates and as the time until the payment is made increases.
• higher interest rates and as the time until the payment is made decreases.
• lower interest rates and as the time until the payment is made increases.
• lower interest rates and as the time until the payment is made decreases.

You are expecting to receive $650 at some time in the future. Which of the following would decrease the present value of this future payment?

• Interest rates rise and you get the payment sooner.
• Interest rates rise and you have to wait longer for the payment.
• Interest rates fall and you get the payment sooner.
• Interest rates fall and you have to wait longer to get the payment.

Marcus puts a greater proportion of his portfolio into government bonds. This

• increases both risk and the average rate of return
• decreases both risk and the average rate of return
• increases risk, but decreases the average rate of return
• decreases risk, but increases the average rate of return

According to the efficient markets hypothesis, better than expected news about a corporation will

• have no effect on it’s stock price.
• raise the price of the stock.
• lower the price of the stock.
• change the price of the stock in a random direction.

If a person is risk averse, then as wealth increases, total utility of wealth

• increases at an increasing rate
• increases at a decreasing rate
• decreases at an increasing rate
• decreases at a decreasing rate