A) both interest rates and the cost of building the restaurant rise.
B) both interest rates and the cost of building the restaurant fall.
C) interest rates rise and the cost of building the restaurant falls.
D) interest rates fall and the cost of building the restaurant rises.
F) C) and D)
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A) the present value of the factory rises.It's more likely the company will build the factory.
B) the present value of the factory rises.It's less likely the company will build the factory.
C) the present value of the factory falls.It's more likely the company will build the factory.
D) the present value of the factory falls.It's less likely the company will build the factory.
F) A) and D)
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A) of winning $120 in two years and the interest rate was 11%.
B) of winning $114 in two years and the interest rate was 7%.
C) of winning $110 and two years and the interest rate was 3%.
D) A risk averse person would not accept any of the above bets.
F) A) and C)
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B) False
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A) Stock market prices tend to rise today if they rose yesterday.
B) As judged by the typical person in the market, all stocks are fairly valued all the time.
C) At the market price, the number of shares being offered for sale matches the number of shares people want to buy.
D) All of the above are incorrect.
F) C) and D)
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A) 5 percent for stocks and about 1.5 percent for short-term government bonds.
B) 6 percent for stocks and about 2.5 percent for short-term government bonds.
C) 8 percent for stocks and about 3 percent for short-term government bonds.
D) None of the above is correct.
F) All of the above
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A) 6 percent
B) 7 percent
C) 8 percent
D) 9 percent
F) All of the above
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A) risk increases and so the standard deviation of the return rises.
B) risk increases and so the standard deviation of the return falls.
C) risk decreases and so the standard deviation of the return rises.
D) risk decreases and so the standard deviation of the return falls.
F) All of the above
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A) you wait 4 years and the interest rate is 4%
B) you wait 4 years and the interest rate is 5%
C) you wait 5 years and the interest rate is 4%
D) you wait 5 years and the interest rate is 5%
F) All of the above
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A) rise, and investment spending rise.
B) rise, and investment spending fall.
C) fall, and investment spending rise.
D) fall, and investment spending fall.
F) A) and C)
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A) about 3.5 years
B) about 6.3 years
C) about 12 years
D) about 14 years
F) None of the above
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A) about 6.3 years
B) about 7 years
C) about 7.7 years
D) about 10 years
F) A) and B)
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A) For a fee, an insurance company provides you with regular income until you die.
B) An extra fee charged to persons in dangerous occupations by life insurance companies.
C) It's another name for stock funds managed by mutual fund managers.
D) It's another name for any diversified portfolio.
F) All of the above
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A) index funds should typically beat managed funds, and usually do.
B) index fund should typically beat managed funds, but usually do not.
C) mutual funds should typically beat index funds, and usually do.
D) mutual funds should typically bet index funds, but usually do not.
F) A) and B)
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A) $12,579.84
B) $12,596.80
C) $12,597.12
D) None of the above are correct to the nearest penny.
F) A) and C)
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A) and the example with Edward illustrate adverse selection.
B) and the example with Sally illustrate moral hazard.
C) best illustrates adverse selection, the example with Edward best illustrates moral hazard.
D) best illustrates moral hazard, the example with Edward best illustrates adverse selection.
F) B) and C)
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A) There is a greater reduction in risk by increasing the number of stocks in a portfolio from 1 to 10, than by increasing it from 100 to 120 stocks.
B) The historical rate of return on stocks has been about 5 percentage points higher than the historical rate of return on bonds.
C) Stock in an industry that is very sensitive to economic conditions is likely to have a higher average return than stock in an industry that is not so sensitive to economic conditions.
D) If you had information about a corporation that no one else did, you could earn a very high rate of return.This contradicts the efficient market hypothesis.
F) B) and C)
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A) overvalued, but stock prices continued to rise through mid 2002.
B) overvalued, and stock prices fell by mid 2002.
C) undervalued, but stock prices continued to fall into mid 2002.
D) undervalued, but stock prices continued to rise even into mid 2002.
F) All of the above
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A) 7 percent
B) 8 percent
C) 9 percent
D) 10 percent
F) A) and D)
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A) 70/(1-r) years.
B) 70/(1+r) years.
C) 70/r years.
D) 70(1+r) /r years.
F) A) and C)
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