Finance

6 years ago

Suppose that security C had a risk premium of 30%, describe what arbitrage opportunity exists and ...

Suppose that security C had a risk premium of 30%, describe what arbitrage opportunity exists and how you would exploit it.

Memphic 123 1 Reply

6 years ago

Which of the following statements is FALSE?

Which of the following statements is FALSE?
A) No arbitrage opportunities will exist until the underlying prices diverge by more than the amount of the transaction costs.
B) Because you will generally pay a slightly lower price when you buy

johnpaech 69 1 Reply

6 years ago

Consider an ETF that is made up of one share each of IBM, MRK, and C. The minimum bid price for ...

Consider an ETF that is made up of one share each of IBM, MRK, and C. The minimum bid price for this ETF in a normal market is closest to:
A) $162.85
B) $163.00
C) $168.00
D) $168.10

johnpaech 38 1 Reply

6 years ago

Consider an ETF that is made up of one share each of IBM, MRK, and C. The minimum ask price for ...

Consider an ETF that is made up of one share each of IBM, MRK, and C. The minimum ask price for this ETF in a normal market is closest to:
A) $162.85
B) $163.00
C) $168.00
D) $168.10

Memphic 34 1 Reply

6 years ago

In a normal market with transactions costs, is it possible for different investors to place ...

In a normal market with transactions costs, is it possible for different investors to place different values on an investment opportunity? Are there any limits on the amount that their values can differ?

Memphic 55 1 Reply

6 years ago

Consider an ETF that is made up of one share each of IBM, MRK, and C. The current quote for this ...

Consider an ETF that is made up of one share each of IBM, MRK, and C. The current quote for this ETF currently is $162.75 (bid) $162.80 (ask). What should you do?

Memphic 40 1 Reply

6 years ago

Consider an ETF that is made up of one share each of IBM, MRK, and C. The current quote for this ...

Consider an ETF that is made up of one share each of IBM, MRK, and C. The current quote for this ETF currently is $162.85 (bid) $163.00 (ask). What should you do?

johnpaech 39 1 Reply

6 years ago

Which of the following statements regarding timelines is FALSE?

Which of the following statements regarding timelines is FALSE?
A) Timelines are an important first step in organizing and then solving a financial problem.
B) We refer to a series of cash flows lasting several periods as a stream of cash f

Memphic 67 1 Reply

6 years ago

Which of the following statements regarding the timeline is FALSE?

Which of the following statements regarding the timeline is FALSE?
A) Date 1 is the end of the first year.
B) Date 0 is the beginning of the first year.
C) The space between date 0 and date 1 represents the time period between two spec

Memphic 47 1 Reply

6 years ago

Which of the following statements regarding the timeline is TRUE?

Which of the following statements regarding the timeline is TRUE?
A) Date 1 is the beginning of the first year.
B) Date 2 is the beginning of the second year.
C) Date 1 is the beginning of the second year.
D) Date 0 is the end of

Memphic 61 1 Reply

6 years ago

Which of the following statements is FALSE?

Which of the following statements is FALSE?
A) The process of moving a value or cash flow forward in time is known as compounding.
B) The effect of earning interest on interest is known as compound interest.
C) It is only possible to c

Memphic 49 1 Reply

6 years ago

At an annual interest rate of 7%, the future value of $5000 in five years is closest to:

At an annual interest rate of 7%, the future value of $5000 in five years is closest to:
A) $3565
B) $6750
C) $7015
D) $7035

Memphic 68 1 Reply

6 years ago

The ranking of the four alternatives from most valuable to least valuable if the interest rate is 7% ...

The ranking of the four alternatives from most valuable to least valuable if the interest rate is 7% per year would be:
A) 1, 2, 3, 4
B) 4, 3, 2, 1
C) 3, 4, 2, 1
D) 3, 1, 2, 4

johnpaech 97 1 Reply

6 years ago

The amount of money that would be in the account if you left the money there until your 65th ...

The amount of money that would be in the account if you left the money there until your 65th birthday is closest to:
A) $29,556
B) $148,780
C) $168,824
D) $748,932

Memphic 42 1 Reply

6 years ago

Which of the following statements is FALSE?

Which of the following statements is FALSE?
A) The process of moving a value or cash flow backward in time is known as discounting.
B) FV =
C) The process of moving a value or cash flow forward in time is known as compounding.

johnpaech 68 1 Reply

6 years ago

Consider the following timeline:If the current market rate of interest is 10%, then the future value ...

Consider the following timeline:

If the current market rate of interest is 10%, then the future value of this timeline is closest to:
A) $666
B) $500
C) $605
D) $650

johnpaech 61 1 Reply

6 years ago

Consider the following timeline:If the current market rate of interest is 9%, then the present value ...

Consider the following timeline:

If the current market rate of interest is 9%, then the present value of this timeline as of year 0 is closest to:
A) $492
B) $637
C) $600
D) $400

johnpaech 53 1 Reply

6 years ago

Consider the following timeline:If the current market rate of interest is 8%, then the value of the ...

Consider the following timeline:

If the current market rate of interest is 8%, then the value of the cash flows as of year 1 is closest to:
A) $0
B) $1003
C) $540
D) $77

Memphic 63 1 Reply

6 years ago

Consider the following timeline detailing a stream of cash flows:If the current market rate of ...

Consider the following timeline detailing a stream of cash flows:

If the current market rate of interest is 8%, then the present value of this stream of cash flows is closest to:
A) $22,871
B) $21,211
C) $24,074
D) $26,

johnpaech 59 1 Reply

6 years ago

Consider the following timeline detailing a stream of cash flows:If the current market rate of ...

Consider the following timeline detailing a stream of cash flows:

If the current market rate of interest is 8%, then the future value of this stream of cash flows is closest to:
A) $11,699
B) $10,832
C) $12,635
D) $10,3

Memphic 66 1 Reply

6 years ago

Consider the following timeline detailing a stream of cash flows: If the current market rate of ...

Consider the following timeline detailing a stream of cash flows:
If the current market rate of interest is 6%, then the future value of this stream of cash flows is closest to:
A) $1723
B) $1500
C) $1626
D) $1288

Memphic 50 1 Reply

6 years ago

At an annual interest rate of 7%, the future value of this timeline in year 3 is closest to:

At an annual interest rate of 7%, the future value of this timeline in year 3 is closest to:
A) $3295
B) $3600
C) $3770
D) $4035

Memphic 53 1 Reply

6 years ago

At an annual interest rate of 7%, the present value of this timeline in year 0 is closest to:

At an annual interest rate of 7%, the present value of this timeline in year 0 is closest to:
A) $3080
B) $3600
C) $3770
D) $4035

Memphic 61 1 Reply

6 years ago

At an annual interest rate of 7%, the future value of this timeline in year 2 is closest to:

At an annual interest rate of 7%, the future value of this timeline in year 2 is closest to:
A) $3080
B) $3525
C) $3770
D) $4035

Memphic 47 1 Reply

6 years ago

In terms of present value, how much will Joe receive for selling the family business?

Memphic 30 1 Reply

6 years ago

If the appropriate interest rate is 10%, then the NPV of this opportunity is closest to:

If the appropriate interest rate is 10%, then the NPV of this opportunity is closest to:
A) ($88,000)
B) $88,000
C) $300,000
D) $1,300,000

Memphic 69 1 Reply

6 years ago

Kampgrounds Inc. is considering purchasing a parcel of wilderness land near a popular historic site. ...

Kampgrounds Inc. is considering purchasing a parcel of wilderness land near a popular historic site. Although this land will cost Kampgrounds $400,000 today, by renting out wilderness campsites on this land, Kampgrounds expects to make $35,000 at the

Memphic 2431 1 Reply

6 years ago

Which of the following statements regarding annuities is FALSE?

Which of the following statements regarding annuities is FALSE?
A) PV of an annuity = C ×
B) The difference between an annuity and a perpetuity is that a perpetuity ends after some fixed number of payments.
C) An annuity is a s

Memphic 77 1 Reply

6 years ago

Which of the following statements regarding growing perpetuities is FALSE?

Which of the following statements regarding growing perpetuities is FALSE?
A) We assume that r < g for a growing perpetuity.
B) PV of a growing perpetuity =
C) To find the value of a growing perpetuity one cash flow at a time

Memphic 55 1 Reply

6 years ago

Which of the following statements regarding growing annuities is FALSE?

Which of the following statements regarding growing annuities is FALSE?
A) A growing annuity is a stream of N growing cash flows, paid at regular intervals.
B) We assume that g < r when using the growing annuity formula.
C) PV of a

johnpaech 58 1 Reply

6 years ago

Which of the following formulas is INCORRECT?

Which of the following formulas is INCORRECT?
A) PV of a growing annuity = C ×
B) PV of an annuity = C ×
C) PV of a growing perpetuity =
D) PV of a perpetuity =

johnpaech 53 1 Reply

6 years ago

Assuming that costs continue to increase an average of 4% per year, tuition and other costs for one ...

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:
A) $12,500
B) $21,500
C) $320,568
D) $25,323

Memphic 58 1 Reply

6 years ago

The British government has a consol bond outstanding that pays ₤100 in interest each year. ...

The British government has a consol bond outstanding that pays ₤100 in interest each year. Assuming that the current interest rate in Great Britain is 5% and that you will receive your first interest payment one year from now, then the value of

Memphic 86 1 Reply

6 years ago

If the current rate of interest is 8%, then the future value 20 years from now of an investment that ...

If the current rate of interest is 8%, then the future value 20 years from now of an investment that pays $1000 per year and lasts 20 years is closest to:
A) $45,762
B) $36,725
C) $9818
D) $93,219

johnpaech 95 1 Reply

6 years ago

Since your first birthday, your grandparents have been depositing $1000 into a savings account on ...

Since your first birthday, your grandparents have been depositing $1000 into a savings account on every one of your birthdays. The account pays 4% interest annually. Immediately after your grandparents make the deposit on your 18th birthd

Memphic 67 1 Reply

6 years ago

Consider a growing perpetuity that will pay $100 in one year. Each year after that, you will ...

Consider a growing perpetuity that will pay $100 in one year. Each year after that, you will receive a payment on the anniversary of the last payment that is 6% larger than the last payment. This pattern of payments will continue forever.

Memphic 81 1 Reply

6 years ago

You are thinking about investing in a mine that will produce $10,000 worth of ore in the first year. ...

You are thinking about investing in a mine that will produce $10,000 worth of ore in the first year. As the ore closest to the surface is removed it will become more difficult to extract the ore. Therefore, the value of the ore that you m

Memphic 48 1 Reply

6 years ago

The future value at retirement (age 65) of your savings is closest to:

The future value at retirement (age 65) of your savings is closest to:
A) $497,530
B) $928,895
C) $1,263,236
D) $108,000

Memphic 53 1 Reply

6 years ago

Your son is about to start kindergarten in a private school. Currently, the tuition is $12,000 per ...

Your son is about to start kindergarten in a private school. Currently, the tuition is $12,000 per year, payable at the start of the school year. You expect annual tuition increases to average 6% per year over the next 13 years. Ass

johnpaech 148 1 Reply