Question 1

Like other metals,uranium 308 is traded in competitive markets like the New York Metals Exchange.Which of the following would most likely value a given weight of uranium 308 the most?

Accepted Answer

A)  a power station that uses uranium 308 to produce electrical energy
B)  a metals trader who stockpiles and sells actual physical quantities of uranium 308
C)  a speculator who buys and sells uranium 308 on the market without ever using the metal
D)  All buyers and sellers would have the same value for 250 pounds of uranium.E) B) and C)
F) A) and B)

Question 2

Why is the personal decision a financial manager makes as to whether to buy or to rent an apartment as a personal residence most like the professional decision that manager makes as to whether her firm should try to acquire a stake in a fast growing new Internet-based company?

Accepted Answer

A)  Both decisions involve the purchase of assets.
B)  Both decisions will be made based on what provides the greatest long-term benefit.
C)  Both decisions are vital to the financial health of the decision maker.
D)  Both decisions should be made based upon the tradeoff benefits and costs across time.E) B) and C)
F) C) and D)

Question 3

A manufacturer of breakfast cereals has the opportunity to purchase barley at $3.00 a bushel for 10,000 bushels,if it also buys 5000 bushels of wheat at $16.00 per bushel.However,the manufacturer does not use any barley in its products,and currently needs 20,000 bushels of wheat.If the current market price of barley is $3.80 per bushel,and wheat is $15.80 per bushel,should this opportunity be taken,and why?

Accepted Answer

A)  Because the company has no need of barley,the opportunity should not be taken.
B)  Because the opportunity does not meet the company's need for wheat,the opportunity should not be taken.
C)  Because the value of the opportunity is positive,the opportunity should be taken.
D)  Because the value of the opportunity is negative the opportunity should not be taken.E) None of the above
F) All of the above

Question 4

Use the information for the question(s) below.
  As an oil refiner,you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS) crude oil.Because of its lower sulfur content,you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI) crude.
-Assuming you currently have 10,000 Bbls of WTI crude,the total benefits to you if you were to sell the 10,000 Bbls of WTI crude and use the proceeds to purchase and refine ANS crude is closest to:

Accepted Answer

A)  $730,600
B)  $770,000
C)  $771,400
D)  $773,908E) None of the above
F) B) and C)

Question 5

If the risk-free rate of interest (rf) is 6%,then you should be indifferent between receiving $250 in one year or

Accepted Answer

A)  $235.85 today.
B)  $250.00 today.
C)  $265.00 today.
D)  none of the aboveE) A) and C)
F) All of the above

Question 6

To enable costs and benefits to be compared they are typically converted into cash value at the time the benefit is received.

Accepted Answer

A) True 
 B)False

Question 7

What is a competitive market?

Accepted Answer

A)  a market in which goods can be bought at the ask price and sold at bid price
B)  a market in which a good can be bought and sold at the same price
C)  a market in which a good is sold at a lower price than that for which it can be bought
D)  a market in which a good is bought for a lower price than that for which it can be soldE) A) and B)
F) B) and D)

Question 8

Which of the following statements regarding the valuing of costs and benefits is NOT correct?

Accepted Answer

A)  The first step in evaluating a project is to identify its costs and benefits.
B)  In the absence of competitive markets,we can use one-sided prices to determine exact cash values.
C)  Competitive market prices allow us to calculate the value of a decision without worrying about the tastes or opinions of the decision maker.
D)  Because competitive markets exist for most commodities and financial assets,we can use them to determine cash values and evaluate decisions in most situations.E) None of the above
F) B) and D)

Question 9

Whenever a good trades in a competitive market,the price the good trades for determines the value of the good.

Accepted Answer

A) True 
 B)False

Question 10

Why should you approach every problem by drawing a timeline?

Accepted Answer

A)  Timelines allow you to quickly sum cash flows over time.
B)  Timelines eliminate the majority of flawed financial decisions.
C)  Timelines can be used to schedule events which are yet to occur.
D)  Timelines identify events in a transaction or investment which might otherwise be easily overlooked.E) All of the above
F) B) and D)

Question 11

A vintner is deciding when to release a vintage of sauvignon blanc.If it is bottled and released now,the wine will be worth $2.2 million.If it is barrel aged for a further year,it will be worth 20% more,though there will be additional costs of $500,000.If the interest rate is 7%,what is the difference in the benefit the vintner will realize if he releases the wine after barrel aging it for one year or if he releases the wine now?

Accepted Answer

A)  He will earn $600,000 less if he releases the wine now.
B)  He will earn $60,000 less if he releases the wine now.
C)  He will earn $107,000 less if he releases the wine now.
D)  He will earn $80,000 more if he releases the wine now.E) C) and D)
F) B) and C)

Question 12

Explain the role played by some of the other management disciplines in financial decision making.

Accepted Answer

The role played by some of the other man...

Question 13

Stella deposits $5,000 in a savings account at a bank that offers interest of 5.5% on such accounts.What is the value of the money in her savings account in one year's time?

Accepted Answer

A)  $4739
B)  $5135
C)  $5275
D)  $7750E) B) and C)
F) B) and D)

Question 14

Which of the following statements is INCORRECT?

Accepted Answer

A)  In general,money toady is worth more than money in one year.
B)  We define the risk-free interest rate (rf) for a given period as the interest rate at which money can be borrowed or lent without risk over that period.
C)  We refer to (1 - rf) as the interest rate factor for risk-free cash flows.
D)  For most financial decisions,costs and benefits occur at different points in time.E) None of the above
F) A) and B)

Question 15

If the risk-free rate of interest (rf) is 6%,then you should be indifferent between receiving $250 today or

Accepted Answer

A)  $235.85 in one year.
B)  $250.00 in one year.
C)  $265.00 in one year.
D)  none of the aboveE) B) and C)
F) None of the above

Question 16

If the one-year discount factor is equal to 0.90909,the interest must be equal to:

Accepted Answer

A)  5.0%
B)  9.1%
C)  9.5%
D)  10.0%E) A) and D)
F) B) and D)

Question 17

How can we make a financial decision with cash flows occurring at different points in time?

Accepted Answer

We need to transform the cash flows to a...

Question 18

Why is it usually necessary to use the time value of money when performing a cost benefit analysis?

Accepted Answer

A)  For an investment project to be considered,costs must have a higher dollar value from benefits.
B)  In most investment projects costs are incurred up front,but benefits are provided in the future.
C)  For practical purposes,a dollar today may be considered to be equal to a dollar at some future time.
D)  Although costs and benefits generally occur concurrently,the benefits will accrue value over time,due to interest.E) A) and B)
F) C) and D)

Question 19

Use the information for the question(s) below.
  As an oil refiner,you are able to produce $76 worth of unleaded gasoline from one barrel of Alaska North Slope (ANS) crude oil.Because of its lower sulfur content,you can produce $77 worth of unleaded gasoline from one barrel of West Texas Intermediate (WTI) crude.
-Another oil refiner is offering to trade you 10,150 Bbls of Alaska North Slope (ANS) crude oil for 10,000 Bbls of West Texas Intermediate (WTI) crude oil.Assuming you currently have 10,000 Bbls of WTI crude,what should you do?

Accepted Answer

A)  Sell 10,00 Bbls WTI crude on the market and use the proceeds to purchase and refine ANS crude.
B)  Do nothing,refine the 10,000 Bbls of WTI crude.
C)  Trade the 10,000 Bbls WTI crude with the other refiner and refine the 10,150 Bbls of ANS crude.
D)  Trade the 10,000 Bbls WTI crude with the other refiner and then sell the 10,150 Bbls of ANS crude.E) A) and B)
F) A) and C)

Question 20

Which of the following is the best statement of the Valuation Principle?

Accepted Answer

A)  It is not possible to compare costs and benefits that occur at different points in time,in different currencies,or with different risks.
B)  The value of a commodity or an asset to the firm or its investors is determined by its competitive market price.When the value of the benefits exceeds the value of the costs in terms of market prices,the decision will increase the market value of the firm.
C)  The rate at which we can exchange money today for money in the future by borrowing or investing is the current market interest rate and is same across all banks.
D)  If equivalent goods or securities trade simultaneously in different markets across the world,they will trade for the same price.E) A) and B)
F) A) and C)

Exam 3: Time Value of Money: An Introduction

Whenever a good trades in a competitive market,the price the good trades for determines the value of the good.

Correct Answer
verified

Correct Answer
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Which of the following is the best statement of the Valuation Principle?

Correct Answer
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Correct Answer
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To enable costs and benefits to be compared they are typically converted into cash value at the time the benefit is received.

Correct Answer
verified

Why should you approach every problem by drawing a timeline?

Correct Answer
verified

Stella deposits $5,000 in a savings account at a bank that offers interest of 5.5% on such accounts.What is the value of the money in her savings account in one year's time?

Correct Answer
verified

Why is it usually necessary to use the time value of money when performing a cost benefit analysis?

Correct Answer
verified

Why is the personal decision a financial manager makes as to whether to buy or to rent an apartment as a personal residence most like the professional decision that manager makes as to whether her firm should try to acquire a stake in a fast growing new Internet-based company?

Correct Answer
verified

Which of the following statements regarding the valuing of costs and benefits is NOT correct?

Correct Answer
verified

What is a competitive market?

Correct Answer
verified

If the one-year discount factor is equal to 0.90909,the interest must be equal to:

Correct Answer
verified

Like other metals,uranium 308 is traded in competitive markets like the New York Metals Exchange.Which of the following would most likely value a given weight of uranium 308 the most?

Correct Answer
verified

Explain the role played by some of the other management disciplines in financial decision making.

Correct Answer
verified
The role played by some of the other man...
View Answer

If the risk-free rate of interest (r_f) is 6%,then you should be indifferent between receiving $250 today or

Correct Answer
verified

How can we make a financial decision with cash flows occurring at different points in time?

Correct Answer
verified
We need to transform the cash flows to a...
View Answer

Correct Answer
verified

If the risk-free rate of interest (r_f) is 6%,then you should be indifferent between receiving $250 in one year or

Correct Answer
verified

Which of the following statements is INCORRECT?

Correct Answer
verified

Correct Answer
verified

Exam 3: Time Value of Money: An Introduction

Whenever a good trades in a competitive market,the price the good trades for determines the value of the good.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is the best statement of the Valuation Principle?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To enable costs and benefits to be compared they are typically converted into cash value at the time the benefit is received.

Correct AnswerverifiedShow Answer

Why should you approach every problem by drawing a timeline?

Correct AnswerverifiedShow Answer

Stella deposits $5,000 in a savings account at a bank that offers interest of 5.5% on such accounts.What is the value of the money in her savings account in one year's time?

Correct AnswerverifiedShow Answer

Why is it usually necessary to use the time value of money when performing a cost benefit analysis?

Correct AnswerverifiedShow Answer

Why is the personal decision a financial manager makes as to whether to buy or to rent an apartment as a personal residence most like the professional decision that manager makes as to whether her firm should try to acquire a stake in a fast growing new Internet-based company?

Correct AnswerverifiedShow Answer

Which of the following statements regarding the valuing of costs and benefits is NOT correct?

Correct AnswerverifiedShow Answer

What is a competitive market?

Correct AnswerverifiedShow Answer

If the one-year discount factor is equal to 0.90909,the interest must be equal to:

Correct AnswerverifiedShow Answer

Like other metals,uranium 308 is traded in competitive markets like the New York Metals Exchange.Which of the following would most likely value a given weight of uranium 308 the most?

Correct AnswerverifiedShow Answer

Explain the role played by some of the other management disciplines in financial decision making.

Correct AnswerverifiedThe role played by some of the other man...View AnswerShow Answer

If the risk-free rate of interest (rf) is 6%,then you should be indifferent between receiving $250 today or

Correct AnswerverifiedShow Answer

How can we make a financial decision with cash flows occurring at different points in time?

Correct AnswerverifiedWe need to transform the cash flows to a...View AnswerShow Answer

Correct AnswerverifiedShow Answer

If the risk-free rate of interest (rf) is 6%,then you should be indifferent between receiving $250 in one year or

Correct AnswerverifiedShow Answer

Which of the following statements is INCORRECT?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
verified
The role played by some of the other man...
View Answer

If the risk-free rate of interest (r_f) is 6%,then you should be indifferent between receiving $250 today or

Correct Answer
verified

Correct Answer
verified
We need to transform the cash flows to a...
View Answer

Correct Answer
verified

If the risk-free rate of interest (r_f) is 6%,then you should be indifferent between receiving $250 in one year or

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified