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  • Saint MBA570 Module 2 Quiz

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    Saint MBA570 module 2 quiz Saint MBA570 module 2 quiz Question 1. 1. Which of the following statements regarding the valuing of costs and benefits is not correct? (Points : 10) The first step in evaluating a project is to identify its costs and benefits. In the absence of competitive markets, we can use one-sided prices to determine exact cash values. Competitive market prices allow us to calculate the value of a decision without worrying about the tastes or opinions of the decision maker. Because competitive markets exist for most commodities and financial assets, we can use them to determine cash values and evaluate decisions in most situations. Question 2. 2. A project you are considering is expected to provide benefits worth $225,000 in one year. If the risk-free rate of interest (rf) is 8%, then the value of the benefits of this project today are closest to __________. (Points : 10) $190,333 $208,333 $225,000 $243,000 $190,333 $208,333 $225,000 $243,000 Question 3. 3. If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving $250 today or: (Points : 10) $235.85 in one year. $250.00 in one year. $265.00 in one year. none of these. Question 4. 4. The owner of the Krusty Krab is considering selling his restaurant and retiring. An investor has offered to buy the Krusty Krab for $350,000 whenever the owner is ready for retirement. The owner is considering the following three alternatives: 1. Sell the restaurant now and retire. 2. Hire someone to manage the restaurant for the next year and retire. This will require the owner to spend $50,000 now, but will generate $100,000 in profit next year. In one year the owner will sell the restaurant. 3. Scale back the restaurant’s hours and ease into retirement over the next year. This will require the owner to spend $40,000 on expenses now, but will generate $75,000 in profit at the end of the year. In one year the owner will sell the restaurant. If the interest rate is 7%, the alternative with the highest NPV is: (Points : 10) alternative #1 with an NPV of approximately $350,000. alternative #2 with an NPV of approximately $370,561. alternative #3 with an NPV of approximately $357,196. alternative #2 with an NPV of approximately $380,561. Question 5. 5. Which of the following statements regarding arbitrage and security prices is incorrect? (Points : 10) We call the price of a security in a normal market the no-arbitrage price for the security. In financial markets it is possible to sell a security you do not own by doing a short sale. When a bond is underpriced, the arbitrage strategy involves selling the bond and investing some of the proceeds. The general formula for the no-arbitrage price of a security is Price(security) = PV(all cash flows paid by the security). Question 6. 6. Suppose that a security with a risk-free cash flow of $1,000 in one year trades for $930 today. If there are no arbitrage opportunities, then the current risk-free rate is closest to __________. (Points : 10) 6.0% 6.5% 7.0% 7.5% 8.0% Question 7. 7. At an annual interest rate of 7%, the future value of $5,000 in five years is closest to __________. (Points : 10) $3,565 $6,750 $7,015 $7,035 Question 8. 8. If the current rate of interest is 8%, then the present value of an investment that pays $1,000 per year and lasts 20 years is closest to __________. (Points : 10) $18,519 $45,761 $9,818 $20,000 Question 9. 9. Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child’s college education. Currently, college tuition, books, fees, and other costs average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year. Assuming that costs continue to increase an average of 4% per year, tuition and other costs for one year for this student in 18 years when she enters college will be closest to ________

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    Saint MBA570 module 2 quiz Saint MBA570 module 2 quiz Question 1. 1. Which of the following statements regarding the valuing of costs and benefits is not correct? (Points : 10) The first step in evaluating a project is to identify its costs and benefits. In the absence of competitive markets, we can use one-sided prices to determine exact cash values. Competitive market prices allow us to calculate the value of a decision without worrying about the tastes or opinions of the decision maker. Because competitive markets exist for most commodities and financial assets, we can use them to determine cash values and evaluate decisions in most situations. Question 2. 2. A project you are considering is expected to provide benefits worth $225,000 in one year. If the risk-free rate of interest (rf) is 8%, then the value of the benefits of this project today are closest to __________. (Points : 10) $190,333 $208,333 $225,000 $243,000 $190,333 $208,333 $225,000 $243,000 Question 3. 3. If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving $250 today or: (Points : 10) $235.85 in one year. $250.00 in one year. $265.00 in one year. none of these. Question 4. 4. The owner of the Krusty Krab is considering selling his restaurant and retiring. An investor has offered to buy the Krusty Krab for $350,000 whenever the owner is ready for retirement. The owner is considering the following three alternatives: 1. Sell the restaurant now and retire. 2. Hire someone to manage the restaurant for the next year and retire. This will require the owner to spend $50,000 now, but will generate $100,000 in profit next year. In one year the owner will sell the restaurant. 3. Scale back the restaurant’s hours and ease into retirement over the next year. This will require the owner to spend $40,000 on expenses now, but will generate $75,000 in profit at the end of the year. In one year the owner will sell the restaurant. If the interest rate is 7%, the alternative with the highest NPV is: (Points : 10) alternative #1 with an NPV of approximately $350,000. alternative #2 with an NPV of approximately $370,561. alternative #3 with an NPV of approximately $357,196. alternative #2 with an NPV of approximately $380,561. Question 5. 5. Which of the following statements regarding arbitrage and security prices is incorrect? (Points : 10) We call the price of a security in a normal market the no-arbitrage price for the security. In financial markets it is possible to sell a security you do not own by doing a short sale. When a bond is underpriced, the arbitrage strategy involves selling the bond and investing some of the proceeds. The general formula for the no-arbitrage price of a security is Price(security) = PV(all cash flows paid by the security). Question 6. 6. Suppose that a security with a risk-free cash flow of $1,000 in one year trades for $930 today. If there are no arbitrage opportunities, then the current risk-free rate is closest to __________. (Points : 10) 6.0% 6.5% 7.0% 7.5% 8.0% Question 7. 7. At an annual interest rate of 7%, the future value of $5,000 in five years is closest to __________. (Points : 10) $3,565 $6,750 $7,015 $7,035 Question 8. 8. If the current rate of interest is 8%, then the present value of an investment that pays $1,000 per year and lasts 20 years is closest to __________. (Points : 10) $18,519 $45,761 $9,818 $20,000 Question 9. 9. Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child’s college education. Currently, college tuition, books, fees, and other costs average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year. Assuming that costs continue to increase an average of 4% per year, tuition and other costs for one year for this student in 18 years when she enters college will be closest to ________

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    636 vizualizări2 pagini

    Saint MBA570 Module 2 Quiz

    Încărcat de

    teacher.theacestud
    Saint MBA570 module 2 quiz Saint MBA570 module 2 quiz Question 1. 1. Which of the following statements regarding the valuing of costs and benefits is not correct? (Points : 10) The first step in evaluating a project is to identify its costs and benefits. In the absence of competitive markets, we can use one-sided prices to determine exact cash values. Competitive market prices allow us to calculate the value of a decision without worrying about the tastes or opinions of the decision maker. Because competitive markets exist for most commodities and financial assets, we can use them to determine cash values and evaluate decisions in most situations. Question 2. 2. A project you are considering is expected to provide benefits worth $225,000 in one year. If the risk-free rate of interest (rf) is 8%, then the value of the benefits of this project today are closest to __________. (Points : 10) $190,333 $208,333 $225,000 $243,000 $190,333 $208,333 $225,000 $243,000 Question 3. 3. If the risk-free rate of interest (rf) is 6%, then you should be indifferent between receiving $250 today or: (Points : 10) $235.85 in one year. $250.00 in one year. $265.00 in one year. none of these. Question 4. 4. The owner of the Krusty Krab is considering selling his restaurant and retiring. An investor has offered to buy the Krusty Krab for $350,000 whenever the owner is ready for retirement. The owner is considering the following three alternatives: 1. Sell the restaurant now and retire. 2. Hire someone to manage the restaurant for the next year and retire. This will require the owner to spend $50,000 now, but will generate $100,000 in profit next year. In one year the owner will sell the restaurant. 3. Scale back the restaurant’s hours and ease into retirement over the next year. This will require the owner to spend $40,000 on expenses now, but will generate $75,000 in profit at the end of the year. In one year the owner will sell the restaurant. If the interest rate is 7%, the alternative with the highest NPV is: (Points : 10) alternative #1 with an NPV of approximately $350,000. alternative #2 with an NPV of approximately $370,561. alternative #3 with an NPV of approximately $357,196. alternative #2 with an NPV of approximately $380,561. Question 5. 5. Which of the following statements regarding arbitrage and security prices is incorrect? (Points : 10) We call the price of a security in a normal market the no-arbitrage price for the security. In financial markets it is possible to sell a security you do not own by doing a short sale. When a bond is underpriced, the arbitrage strategy involves selling the bond and investing some of the proceeds. The general formula for the no-arbitrage price of a security is Price(security) = PV(all cash flows paid by the security). Question 6. 6. Suppose that a security with a risk-free cash flow of $1,000 in one year trades for $930 today. If there are no arbitrage opportunities, then the current risk-free rate is closest to __________. (Points : 10) 6.0% 6.5% 7.0% 7.5% 8.0% Question 7. 7. At an annual interest rate of 7%, the future value of $5,000 in five years is closest to __________. (Points : 10) $3,565 $6,750 $7,015 $7,035 Question 8. 8. If the current rate of interest is 8%, then the present value of an investment that pays $1,000 per year and lasts 20 years is closest to __________. (Points : 10) $18,519 $45,761 $9,818 $20,000 Question 9. 9. Suppose that a young couple has just had their first baby and they wish to ensure that enough money will be available to pay for their child’s college education. Currently, college tuition, books, fees, and other costs average $12,500 per year. On average, tuition and other costs have historically increased at a rate of 4% per year. Assuming that costs continue to increase an average of 4% per year, tuition and other costs for one year for this student in 18 years when she enters college will be closest to ________

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    10/12/2015

    TheAceStudent:SaintMBA570module2quiz

    SaintMBA570module2quiz
    SaintMBA570module2quiz
    Question1.1.Whichofthefollowingstatementsregardingthevaluingofcostsandbenefitsisnot
    correct?(Points:10)
    Thefirststepinevaluatingaprojectistoidentifyitscostsandbenefits.
    Intheabsenceofcompetitivemarkets,wecanuseonesidedpricestodetermineexactcash
    values.
    Competitivemarketpricesallowustocalculatethevalueofadecisionwithoutworryingaboutthe
    tastesoropinionsofthedecisionmaker.
    Becausecompetitivemarketsexistformostcommoditiesandfinancialassets,wecanusethemto
    determinecashvaluesandevaluatedecisionsinmostsituations.
    Question2.2.Aprojectyouareconsideringisexpectedtoprovidebenefitsworth$225,000inone
    year.Iftheriskfreerateofinterest(rf)is8%,thenthevalueofthebenefitsofthisprojecttodayare
    closestto__________.(Points:10)
    $190,333
    $208,333
    $225,000
    $243,000

    $190,333
    $208,333
    $225,000
    $243,000
    Question3.3.Iftheriskfreerateofinterest(rf)is6%,thenyoushouldbeindifferentbetween
    receiving$250todayor:(Points:10)
    $235.85inoneyear.
    $250.00inoneyear.
    $265.00inoneyear.
    noneofthese.
    Question4.4.TheowneroftheKrustyKrabisconsideringsellinghisrestaurantandretiring.An
    investorhasofferedtobuytheKrustyKrabfor$350,000whenevertheownerisreadyforretirement.
    Theownerisconsideringthefollowingthreealternatives:1.Selltherestaurantnowandretire.2.
    Hiresomeonetomanagetherestaurantforthenextyearandretire.Thiswillrequiretheownerto
    spend$50,000now,butwillgenerate$100,000inprofitnextyear.Inoneyeartheownerwillsellthe
    restaurant.3.Scalebacktherestaurantshoursandeaseintoretirementoverthenextyear.This
    willrequiretheownertospend$40,000onexpensesnow,butwillgenerate$75,000inprofitatthe
    endoftheyear.Inoneyeartheownerwillselltherestaurant.Iftheinterestrateis7%,the
    alternativewiththehighestNPVis:(Points:10)
    alternative#1withanNPVofapproximately$350,000.
    alternative#2withanNPVofapproximately$370,561.
    alternative#3withanNPVofapproximately$357,196.
    alternative#2withanNPVofapproximately$380,561.
    Question5.5.Whichofthefollowingstatementsregardingarbitrageandsecuritypricesis
    incorrect?(Points:10)
    Wecallthepriceofasecurityinanormalmarketthenoarbitragepriceforthesecurity.
    Infinancialmarketsitispossibletosellasecurityyoudonotownbydoingashortsale.
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    TheAceStudent:SaintMBA570module2quiz

    Whenabondisunderpriced,thearbitragestrategyinvolvessellingthebondandinvestingsomeof
    theproceeds.
    ThegeneralformulaforthenoarbitragepriceofasecurityisPrice(security)=PV(allcashflows
    paidbythesecurity).
    Question6.6.Supposethatasecuritywithariskfreecashflowof$1,000inoneyeartradesfor
    $930today.Iftherearenoarbitrageopportunities,thenthecurrentriskfreerateisclosestto
    __________.(Points:10)
    6.0%
    6.5%
    7.0%
    7.5%
    8.0%
    Question7.7.Atanannualinterestrateof7%,thefuturevalueof$5,000infiveyearsisclosestto
    __________.(Points:10)
    $3,565
    $6,750
    $7,015
    $7,035
    Question8.8.Ifthecurrentrateofinterestis8%,thenthepresentvalueofaninvestmentthat
    pays$1,000peryearandlasts20yearsisclosestto__________.(Points:10)
    $18,519
    $45,761
    $9,818
    $20,000
    Question9.9.Supposethatayoungcouplehasjusthadtheirfirstbabyandtheywishtoensure
    thatenoughmoneywillbeavailabletopayfortheirchildscollegeeducation.Currently,college
    tuition,books,fees,andothercostsaverage$12,500peryear.Onaverage,tuitionandothercosts
    havehistoricallyincreasedatarateof4%peryear.Assumingthatcostscontinuetoincreasean
    averageof4%peryear,tuitionandothercostsforoneyearforthisstudentin18yearswhenshe
    enterscollegewillbeclosestto__________.(Points:10)
    $12,500
    $21,500
    $320,568
    $25,323
    Question10.10.NielsonMotorsisconsideringanopportunitythatrequiresaninvestmentof
    $1,000,000todayandwillprovide$250,000oneyearfromnow,$450,000twoyearsfromnow,and
    $650,000threeyearsfromnow.Iftheappropriateinterestrateis10%,thenNielsonMotorsshould:
    (Points:10)
    investinthisopportunitysincetheNPVispositive.
    notinvestinthisopportunitysincetheNPVispositive.
    investinthisopportunitysincetheNPVisnegative.
    notinvestinthisopportunitysincetheNPVisnegative.
    SaintMBA570module2quiz

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