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Question;Introduction;1. Present;value of \$121,000 expected to be received one year from today at an interest;rate (discount rate) of 10% per year is;a. \$121,000;b. \$100,000;C. \$110,000;d. None of;the above;2. One year;discount factor at a discount rate of 25% per year is;a. 1.25;b. 1.0;C. 0.8;d. None of the above;3. The;one-year discount factor at an interest rate of 100% per year is;a. 1.5 B.;0.5;c. 0.25;d. None of;the above;4. Present;Value of \$100,000 that is, expected, to be received at the end of one year at a;discount rate of 25% per year is;A. \$80,000;b. \$125,000;c. \$100,000;d. None of;the above;5. If the;one-year discount factor is 0.8333, what is the discount rate (interest rate);per year?;a. 10%;B. 20%;c. 30%;d. None of;the above;6. If the;present value of \$480 to be paid at the end of one year is \$400, what is the;one-year discount factor?;A. 0.8333;b. 1.20;c. 0.20;d. None of;the above;7. If the present;value of \$250 expected to be received one year from today is \$200, what is the;discount rate?;a. 10%;b. 20%;1;Junjie Liu ? Econ 282 Practice;Multiple Choice;C. 25%;d. None of;the above;8. If the;one-year discount factor is 0.90, what is the present value of \$120 to be;received one year from today?;a. \$100;b. \$96;C. \$108;d. None of;the above;9. If the;present value of \$600 expected to be received one year from today is \$400, what;is the one-year discount rate?;a. 15%;b. 20%;c. 25%;D. 50%;10. The present value formula for one period cash flow is;a. PV = C1(1 + r) B. PV = C1/(1 + r) c. PV = C1/r;d. None of the above;11. The net present value formula for one period is: I) NPV;= C0+ [C1/(1 + r)], II) NPV = PV - required investment, and III) NPV = C0/C1;a. I only;B. I and II only c. III only;d. None of the above;12. An initial investment of \$400,000 will produce an end of;year cash flow of \$480,000. What is the NPV of the project at a discount rate;of 20%?;a. \$176,000 b. \$80,000 C. \$0 (zero);d. None of the above;13. If the present value of a cash flow generated by an;initial investment of \$200,000 is \$250,000, what is the NPV of the project?;a. \$250,000 B. \$50,000 c. \$200,000;d. None of the above;14. Which of the following statements about risk are (is);true: a. A safe dollar is worth the same as a risky one;2;b. A safe;dollar is worth less than a risky one C. A safe dollar is worth more than a;risky one;d. None of;the above statements are true;15. The;following statements regarding the NPV rule and the rate of return rule are;true except;a. Accept a;project if its NPV > 0;b. Reject a;project if the NPV 0;d. Accept a;project if its rate of return > opportunity cost of capital;16. An initial;investment of \$500 produces a cash flow \$550 one year from today. Calculate the;rate of return on the project;A. 10%;b. 15%;c. 25%;d. None of;the above;17. According;to the net present value rule, an investment in a project should be made if;the;a. Net;present value is greater than the cost of investment;b. Net;present value is greater than the present value of cash flows;C. Net present value is positive;d. Net;present value is negative;18. Which of;the following statements regarding the net present value rule and the rate of;return rule is not true?;A. Accept a project if NPV > cost of investment;b. Accept a;project if NPV is positive;c. Accept a;project if return on investment exceeds the rate of return on an equivalent investment;in the financial market;d. Reject a;project if NPV is negative;19. The;payoffs of an investment are dependent on the state of the economy. The economy;can have two states, recession or growth, with equal probability. If the payoff;in the event of growth is \$140 and in the event of recession is \$60, what is;the expected payoff for the investment?;A. \$100;b. \$110;c. \$120;d. None of;the above;20. If the;probability of a recession is 0.2, normal growth is 0.5 and a boom is 0.3, and;the payoff in the event of a recession is \$100, normal growth is \$400 and boom;is \$500, what is the expected payoff?;a. \$200;B. \$330;3;c. \$400;d. None of;the above;21. Current;price of Company X's stock is \$90. The table below gives the data on end of the;year prices and probabilities dependent on the state of the economy. Calculate;the expected return for the stock.;a. 10%;b. 15%;C. 22.2%;d. None of;the above;22. The;opportunity cost of capital for a risky project is;a. The;expected rate of return on a government security having the same maturity as;the project;b. The;expected rate of return on a well-diversified portfolio of common stocks;C. The expected rate of return on a portfolio of securities;of similar risks as the project;d. None of;the above;23. Mr. Free;has \$100 dollars income this year and zero income next year. The market;interest rate is 10% per year. If Mr. Free consumes \$30 this year, and invests;the rest in the market, what will be his consumption next year?;a. \$50;b. \$100;C. \$77;d. \$55;24. Mr. Bird;has \$100 income this year and zero income next year. The market interest rate;is 10% per year. Mr. Bird also has an investment opportunity in which he can;invest \$50 today and receive \$80 next year. Suppose Mr. Bird consumes \$30 this;year and invests in the project. What will be his consumption next year?;a. \$88;B. \$102;c. \$80;d. \$100;25. Ms. Venus;has \$100 income this year and \$110 next year. The market interest rate is 10%;per year. Suppose Ms. Venus consumes \$60 this year. What will be her;consumption next year? A. \$154;b. \$170;c. \$120;d. None of;the above;4;26. Mr. Thomas;has \$100 income this year and zero income next year. The market interest rate;is 10% per year. Mr. Thomas also has an investment opportunity in which he can;invest \$50 this year and receive \$80 next year. Suppose Mr. Thomas consumes \$50;this year and invests in the project. What will be his consumption next year?;a. \$55 B.;\$80;c. \$50;d. None of;the above;27. Mr. Dell;has \$100 income this year and zero income next year. The market interest rate;is 10% per year. Mr. Dell also has an investment opportunity in which he can;invest \$50 this year and receive \$80 next year. Suppose Mr. Dell consumes \$50;this year and invests in the project. What is the NPV of the investment;opportunity?;a. \$5;B. \$22.73;c. \$0;(zero);d. None of;the above;28. Ms.;Anderson has \$60,000 income this year and \$40,000 next year. The market;interest rate is 10% per year. Suppose Ms. Anderson consumes \$80,000 this year.;What will be her consumption next year?;a. \$60,000;b. \$30,000;c. \$70,000;D. \$18,000;29. The line;that connects the maximum that one can consume this year (now) and the maximum;one can consume next year;a. Has a;slope of (1 + r) B. Has a slope of -(1 + r);c. Has a;slope of r;d. Has a;slope of 1/r;30. Ms.;Newcastle has \$60,000 income this year and \$40,000 next year. The market;interest rate is 10% per year. Suppose Ms. Newcastle wishes to consume \$62,000;next year. What will be her consumption this year?;a. \$60,000;B. \$40,000;c. \$70,000;d. \$19,000;31. Mr. Smith;has an income of \$40,000 this year and \$60,000 next year. He can invest in a;project that costs \$30,000 this year, which generates an income of \$36,000 next;year. The market interest rate is 10%. What will be his consumption next year;if Mr. Smith invests in the project and consumes \$50,000 this year?;a. \$40,000;5;B. \$52,000;c. \$60,000;d. None of;the above;32. The;discount rate is used for calculating the NPV is: A. Determined by the;financial markets;b. Found by;the government;c. Found by;the CEO;d. None of;the above;33. The;managers of a firm can maximize stockholder wealth by: A. Taking all projects;with positive NPVs;b. Taking;all projects with NPVs greater than the cost of investment;c. Taking;all projects with NPVs greater than present value of cash flow;d. All of;the above

Paper#49167 | Written in 18-Jul-2015

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