1

1. Suppose the risk-free interest rate is 6%.Having $500 today is equivalent to having what amount in one year? (round your answer to the nearest dollar

Question 2

1. Suppose the risk-free interest rate is 6%.Having $500 in one year is equivalent to having what amount today? (round your answer to the nearest dollar)

Question 3

1. Your firm considers investing$3.5million today in a marketing campaign.The campaign is expected to increase profits(i.e.produce cash flows)by$2million at the end of each of the next two years.Assume there is no uncertainty about these cash flows and the risk-free rate is12%.What is the NPV of this investment opportunity?(Picktheclosestanswer)

   a.	-0.5
   b.	-0.2
   c.	-0.1
   d.	+0.1
   e.	+0.2
   f.	+0.5

Question 4

1. Shouldyourfirminvestin themarketingcampaign?

   Yes,because theNPVisgreater than zero.

   Yes, because the NPV is less than zero.

   No,because theNPVisgreater than zero.

   No, because the NPV is less than zero.

Question 5

1. Youneedtoraisesomemoneytobuytextbooks,soyoudecidetosellyourstampcollection.You'vefoundabuyerwillingtopay$600forthecollection,buthewon'tpayyouuntiloneyearfromnow.Ifyoucanborrowfromyourbankataninterestrateof10%,howmuchcanyouspendontextbookstoday?(roundyouranswertothenearestdollar)

Question 6

1. A financial security promises to pay$50next year,$100in year2,and$200in year3,with no risk.If the risk-free interest rate is3%,what is the no-arbitrage price of the security?(roundyouranswerto thenearestdollar)

Question 7

1. A financial security promises to pay $50 next year, $100 in year 2, and $200 in year 3, with no risk. If the risk-free interest rate is 0%, what is the no-arbitrage price of the security?

Question 8

1. Afinancialsecuritythatpromises topay$330exactlyoneyearfromnowissellingfor$300today.Ifbanksare currentlyoffering interestratesof5%ondeposits,whatdoyouexpectwillhappento theprice of thefinancialsecurity?

   The price shouldincrease

   The price shoulddecrease

   The price shouldstayaboutthesame

   Notenoughinformation

Question 9

1. Supposeafinancialsecuritypromisestopay$210nextyearwithnorisk.Ifthepriceofthesecurityinanormalmarketis$200,whatmustbetherisk-freeinterestrate?[expressyouranswerinpercentagepointsandroundtothenearestwholenumber--i.e.,if youthinktheansweris6.2%,enter"6"]

Question 10

1. Alphabet Soup Inc.is a holding company that owns 100% of ABC Corp. anda 50% stake in XYZ Corp. If the current market value of Alphabet Soup is $100 mm and the current market value of ABC is $60 mm, what is the total current market value of XYZ Corp.(in millions of dollars)?