4)A firm has invested in corporate bonds; it may engage in ...



4)A firm has invested in corporate bonds; it may engage in a financial futures contract in order to protect itself from

A) Inflation

B) Changes in hedging activities

C) Declining Interest Rates

D) Rising interest rates

               

               

               

               

               

               

5) Dr. J. wants to buy a Dell computer which will cost $2,788 four years from today. He would like to set aside an equal amount at the end of each year in order to accumulate the amount needed. He can earn 7% annual return. How much should he set aside?

A) $823.15

B) $531.81

C) $627.93

D) $697.00

6) Under what conditions must a distinction be made between money to be received today and money to be received in the future?

A) when there is no risk of nonpayment in the future

B) when current interest rates are different from expected future rates

C) when idle money can earn a positive return

D) A period of recession

7) To save for her newborn son's college education, Lea Wilson will invest $1,000 at the beginning of each year for the next 18 years. The interest rate is 12 percent. What is the future value?

A) $63,440

B) $55,750

C) $34,931

D) $7,690

               

               

               

               

8) You are to receive $12,000 at the end of 5 years. The available yield on investments is 6%. Which table would you use to determine the value of that sum today?

A) Present value of $1

B) Future value of $1

C) Future value of an annuity

D) Present value of an annuity of $1

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